So You Want to Compete, Huh?

The story of the day from DC appears to be "Obama's economic agenda: Boost US competitiveness" (from AP, via Yahoo!).  So the President appears to believe that the way to spur our economy is by making US businesses more competitive.  I agree!  I wonder if he's serious?

As I totally would expect, there was pretty much zero detail in the story on exactly how the Administration plans to accomplish this.  The allusion was that all would be revealed during the State of the Union address - history shows that promises like this have nearly zero probability of actually materiallizing in any meaningful way (remember Bush's promise to secure the border?).

To me this looks to be the opening act in the Administration's coming run towards the center (gotta get re-elected, right?).  I think we may be in for the most amazing show of polical marketing ever seen!  Expect it to get piled high and deep, and the BS-o-meter to go right off the charts.

This "Competition" nonsense is going to rank right up there.

The truth is that the things required to allow us to actualy compete are the very things that this Administration can't (won't) do.  Competition isn't some abstract concept.  It simply means that US products and services must offer a better value than global alternatives in terms of some meaningful combination (as defined by the buyer) of price, quality and function.  That's pretty much it.



Of the three attributes to facilitate effective competition, quality and function can be explored pretty quickly.  In the commoditized world in which we live there simply aren't enough qualitative differentiators available, or barriers to copying function to make advantages in these areas achievable in the short-term (i.e. before November 2012). 
 
With that being said, offering amazing tax credits for R&D activities and incentivizing (not subsidizing) immediate innovation could produce pretty fast results in bringing back some previously offshored activities (and helping the unemployement rate).
 
Being that this would require effectively reducing corporate taxes, I think this option can be safely discounted:the Administration running towards the center is one thing - a socialist becoming a conservative is probably asking a bit much.
 
Sadly, the fact that the reduction in unemployment costs, additional personal income taxes generated and additional, tertiary tax receipts from higher overall domestic economic activity would probably replace the "lost" corporate taxes a couple of times over will, of course, fall on deaf ears to those folks who are more concerned with positions and power than results.
 
The reality is that the government does not perform commercial innovation, invention or efficiency.  It can only cutoff or disinentivize these activities by the people.
 
So, that leaves price.  If we want to compete (i.e. sell more!) then the fastest path to accomplishing this is to sell our products and services at a better price.  Luckily the government can do plenty about this.  Question: What are the things that systemically make "Made in the USA" more expensive than global alternatives, and over which the government has direct influence?  There are several incredibly important ones:

• Labor Cost - I think that generally most folks would agree that employee earnings should go up, not down.  There is, however, a lot of opportunity to be had around the efficiency of labor dollars.  Paying people not to work, incentivizing unproductive wage allocations and holding companies hostage to broken collective bargaining process (hello Detroit) are all examples of government assisting in the artificial inflation of inefficient labor.  If it sounds like I am criticizing labor unions in a sideways fashion, then let me be direct: Labor unions are broken, just as government is broken.  Listen to the market, assist in its efficiency, and get out of the way.
• Tax Costs - there's simply no way around the facts.  Businesses don't pay taxes - they pass them along to the buyer.  Period.  The End.  Anyone that tells you different is lying, and every cost that is passed along (and increases price) directly, negatively affects competitive position.
• Regulation/Legislation - See "Tax Costs" above.  Regulation (just like funding the Government) is essential.  Inefficient regulation is expensive (uncompetitive).  Beaurocracy as a subsititue for regulation is potentially deadly (Healthcare anyone?).  Guiding theme: We allowed our government to regulate and legislate our manufacturing sector out of existence, and to incentivize the movement of millions of jobs offshore- we can order them to allow it all to come back , and all it takes is a little taste for competition.
• Level the Playing Field - Just as our goverment has disastrously hobbled our businesses' abilities to compete, other countries actively give their own products an edge (in their local markets, as well as here in the US).  Fair is fair.  Anyone not playing fair should be locked out of our markets.  I'm not saying we should go out and start trade wars; only that we should demand fair treatment and accept no less.  The reality is that they need us (and access to our markets) just as much as we need them - and probably more.

Independence is our birthright.  Economic independence is essential in protecting our personal freedoms.  We have access to everything we need, and we have allowed the government to choose for us not to use what we have.  Any item or input (energy, people, rare earth elements) for which we are dependent on another country should be allowed to be produced here.  Do that and we won't just compete - we'll lead the pack.

So there it is Mr. President.  If you seriously want to facilitate the ability of our businesses to compete globally, all you have to do is get out of the way.  And completely alienate the radical core of your support base.  That won't happen.  That's why the latest "story" is just the latest, worthless PR move.  Don't believe it.  Get ready for more.