Strengthening Constitutional Self-Government

No Left Turns

In Defense of Industry

In this weekend’s Wall Street Journal, Fred Smith, the founder and CEO of FedEx argues that our tax and regulatory structure is out of wack:

"The United States has a completely uncompetitive tax structure in general and it has a particularly onerous tax structure for firms that are asset-intensive. If you run an industrial company like FedEx, which employs 290,000 folks, most of whom are blue-collar people, the way we have to run this business is to equip those workers with billions of dollars of assets that allow them to pick up and deliver millions of things around the world."

His theory is that the tax bias against capital explains why so much top U.S. talent got whisked off to become investment bankers. "Not too many young people coming out of school are studying to be production managers at General Motors." He says that most of FedEx’s first line managers come not from the top flight universities, but out of community colleges and the military. "The top talent has wanted to go to Wall Street." . . .

He uses an example from FedEx. "Look, our capital budget as we went into this year was about $3 billion. We went out to Boeing in July for our board meeting to see the new triple seven, [the Boeing 777] which we have bought. If we had a lower corporate tax rate with the ability to expense capital expenditures, guess what? We’d buy more triple sevens. We absolutely have to cut the corporate tax. Our current tax rate is about 38%. Even Germany has a 25% rate."

Smith’s point furthers the point I tried to make a

a little while ago: Banking and finance might need more regulation, but industry probably could use less.

Discussions - 1 Comment

I think your analysis will have to take NAFTA into consideration. How much U.S. industry is left to (de)regulate, anyhow? No one studies to be a production manager at GM because GM can't afford to pay the people it already employs. Furthermore, it would be much more efficacious if instead of adding more layers of regulation to banks and finance, we simply enforced the regulations that already exist, and MORE IMPORTANTLY, take a hard look at the goals and mechanisms of the Federal Reserve. The Fed has simply gone all out to prevent the corrections that provide the necessary feedback loops in our market economy; the day of reckoning must come; I'm not sure we can even fathom what a state our economy is in. Consider the demographics of the United States, and the sorts of industries we have left, and think about whether our massive national debt can be assuaged by anything other than perpetual warmongering and another New Deal to federalize the repair of infrastructure.

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