Why US leaders fail to fix the economy

Barack Obama. Photo from Pixabay.
A former legal adviser to Vice President Joe Biden questions Barack Obama’s reforms on multinational tax evasion during a Melbourne visit. Donal Shiel reports.

In the midst of a vitriolic election campaign in the United States it would come as no surprise to hear a Democrat such as Paul Laudicina, a former legal adviser to Vice President Joe Biden, speak-ill of Republican nominee Donald Trump.

But in a visit to Australia earlier this year, Laudicina also criticised American President Barack Obama’s reforms on multinational tax evasion.

His criticism during a recent visit to Melbourne as President of the Global Business Policy Council followed an address by Obama earlier this year in which the president sought to end “one of the most insidious tax loopholes ever”.

In his speech at the White House, Obama called for an end to a practice in which American-based corporations change their “on-paper” addresses to alter their tax jurisdiction and avoid tax payments.

“When companies exploit loopholes like this, it makes it harder to invest in the things that are going to keep America’s economy going strong for future generations,” Obama said.

Critical of Trump’s economic policy as well, Laudicina said that neither leader had a salve for America’s economy.

“Different politicians have different formulae, none of them in my view are the right approaches yet, because they are all restrictive rather than expansive,” he said.

Paul Laudicina
Paul Laudicina.

According to Laudicina, Trump’s intent to restrict the outsourcing of American jobs and keep them in the US is likely to undermine foreign direct investment (FDI, the controlling ownership in a business by an entity based in another country) and weaken the US economy.

Questions on economic stability come at a time of uncertainty in American culture when, Laudicina told The Standard, “every previous generation always said, ‘I’ve had it good but my kids are going to have it better’, and that’s not what people are thinking these days.”

Foreign investment into the American economy peaked at $US384 billion in 2015, according to Laudicina, the highest recorded since the recession hit America in 2007.

After liaising with various global business executives, Laudicina gauges that if a far-right candidate – like Trump – were to enter office that the shares of companies contributing their FDI to the United States would drop by 13 percentage points.

Laudicina projects the share of companies lowering investment in the US would rise by eight percentage points.

“Political uncertainty and policy gridlock will dampen investor enthusiasm,” Laudicina said in an article published by Forbes.

As new technologies continue to antiquate employment prospects globally, FDI is needed more than ever as a source of job creation.

“Last July in Japan they opened a hotel that is staffed 75 per cent robotically. A robot parks your car, you check in virtually, your door opens with digital recognition. Even the sectors we thought historically require people aren’t necessarily employing people,” Laudicina said.

Multinational corporations contributed 800,000 jobs to the US between 2010 and 2013 as a result of FDI, a number likely to recede if Trump were to gain power.

A decline in job creation was likely to exacerbate a growing gap between student debts and wage growth in the US, and in turn have a significant impact on job security for America’s youth.

“What we’re seeing increasingly is that millennials are bumping up against this glass ceiling, were both the number of jobs available to them and the conversation associated with those jobs is not as encouraging as has been the case for previous generations,” Laudicina said.

Still feeling the aftershock of the 2007 global recession, America has slowly seen decreases in its unemployment numbers, from 10 per cent in October 2009 to only 4.9 per cent by June 2016.

Such positive change is no longer guaranteed for the future. “Honestly and truly, I haven’t seen or read one analysis that is uniformly encouraging about how are we going to generate these jobs,” he said.

Speaking on more than just his economic policy, Laudicina said also that he doubts Trump is up to the task of becoming America’s 45th president.

“There are big question marks about capability and reliability…I think ultimately with Donald Trump, he’s making a lot of promises that conventional analysis suggests he can’t deliver on,” he said.

With the November 8 election looming, Laudicina still found time to poke fun at the locals on his visit.

“You call it the global financial crisis because it was happening around you and not necessarily to you,” he said. “I didn’t know what the GFC was (once arriving in Australia), I thought it was a health food supplement.”

LINK TO OBAMA’s White House Address: https://www.whitehouse.gov/blog/2016/04/08/corporate-inversions-tax-loophole-what-you-need-know