Alternative Facts

by Don Boudreaux on January 23, 2017

in Country Problems, Myths and Fallacies, Reality Is Not Optional, Regulation, Self-deception, Taxes, Trade

Several people have written to me over the past 24 hours to accuse me of credulity for writing the following words in this recent blog post:

[Many people, including lots of Trump supporters] also wrongly assume that businesses in the United States all operate under the burden of uniquely oppressive taxation and heavy regulations.

According to the Fraser Institute’s (and Cato Institute’s) Economic Freedom of the World 2016 Annual Report, the United States is today the world’s 16th freest country economically.  That’s not great; it’s a shame that American economic freedom has been eroded in recent years.  But comparatively speaking – especially considering that economic freedom globally has increased substantially over the past few decades – being ranked the 16th freest county economically does indeed mean that it is wrong to assume that businesses in the United States all operate under the burden of uniquely oppressive taxation and heavy regulations.

Do I believe that this taxation is too high?  Absolutely and without a doubt.  Do I believe that government-imposed regulations in the U.S. are too many and too burdensome?  Absolutely and without a doubt.  Do I support efforts to cut taxes and reduce regulations?  Absolutely and without question and across the board.  But do I believe that Americans are, in comparison with most other people in the world today, uniquely burdened with high taxes and heavy regulations?  Absolutely not.  We simply aren’t so burdened in comparison with most other people in the world today.

Many conservatives today often make two inconsistent claims.  First, they assert that Americans are indeed uniquely burdened with high taxes and restrictive economic regulations.  Second, they complain about the U.S. trade deficit, even offering this deficit as evidence of the unique economic totalitarianism under which Americans today are allegedly crushed.  Yet the U.S. trade deficit means that foreigners are investing more of their resources in the American economy than Americans are investing in non-American economies.

Why would such large amounts of investment funds continue to flow into the American economy, rather than into other economies, if the American economy were such a uniquely impossible place to do business profitably?  I’m aware that one can tell a tale in which an economy such as America’s is made highly unproductive because of government interventions while its current-account (or “trade”) deficit rises.  But because, for example, foreign direct investment in the U.S. has been rising (in 2015 it was $420.7 billion), that tale would be highly implausible.

Here’s another irony: many of the same conservatives who assert that the U.S. economy is today uniquely burdened with government intrusions cheer when Donald Trump promises to further restrict business freedom in the U.S.  They cheer when Trump threatens to unilaterally slap punitive tariffs on companies that seek to lower their costs of production by producing some portion of their output outside of America.  They cheer when Trump promises to reduce the availability of immigrant labor.  They cheer in ignorance.

More freedom will be won only if those of us who cherish freedom get our facts as straight as is humanly possible and keep our arguments as consistent and as sensible as possible.  Hyperbole and inconsistency undermine our cause.


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