WEF Is Right and Yet Clueless

The World Economic Forum released its annual survey of economic competitiveness today and the United States slipped out of the top spot to number six. I don't think this result is off the mark, the US has slipped, but the reasons put forth by the WEF are totally off-base and reflect the malign influence of a set of ideas that goes by the moniker of "Rubinomics" on its economic analysis. From Bloomberg we learn that the number one reason that the US is less competitive is...drumroll...the "twin deficits", which of course refer to the budget deficit and the trade deficit. Let's state first off that this is NOT a defense of budget deficits, but budget deficits have been a fairly regular feature of the US economy for decades, certainly for the last twenty or so years and yet the US economy's performance has been fantastic. In the last twenty-five years we have added the equivalent economic activity of roughly two Chinas or five Germanys. Also, one is compelled to ask how the US slipped in the rankings from last year when our budget deficit over the period was shrinking. It must have been the other twin - the trade deficit. Fine, our trade deficit did indeed grow, pretty much just like the majority of years during the exceptional twenty-five years just past. So why now? Why is our projected $850 billion trade deficit trouble when our $726 billion trade deficit last year didn't prevent us from taking the top spot? Is crossing the $800 billion mark the problem? Who said? How do they know? Curious indeed. There must be more to it and indeed there is. Read down the article to the next reason given - Hurricane Katrina. Yes, our government was slow to respond to hurricane Katrina so we are less competitive as a nation. This is just my impression but I think government is no more or less competent than in years past, how could this effect the ranking? How is it that flat-footedness on something that the government was never capable of handling nor is really supposed to handle means our economy is less competitive? Did France take a hit in their standing for letting enraged Muslim youth burn cars and rampage for weeks before responding? It seems that the WEF is holding the US to some naive statist standard to which the US has never claimed it wished to live up to, or it just taking a cheap short at the administration consistent with opposition talking-points. Either way, it's not very sound economic analysis. Shaky. So what else? Infant mortality and HIV/AIDS. Yes, the US is apparently less competitive because we have more AIDS patients and more babies dying. Well, this is a shop-worn indictment of the universal heathcare brigades. We have more preemies born here because we have such excellent prenatal technology and we have the will to give preemies a chance and many of them die for obvious reasons - other nations don't count or even birth their preemies. AIDS? Is AIDS ravaging a broad spectrum of our productive, working age adult population or is it confined to a subset of adults who are associated with specific behaviors like intraveneous drug use and unprotected sex? It's the latter. Just because we have a higher incidence of AIDS patients relative to Finland reveals not one iota about our relative economic competitiveness. Really shaky.

Of course nowhere in the article is there mention of costly and onerous regulatory policies like Sarbanes-Oxley or creeping protectionist sentiment such as that embodied by theSchumer-Graham tariff proposals or the Dubai Ports World debacle. This report attempts to ignore decades of economic evidence that benign tax and regulatory regimes, the rule of law, and openness to trade create the conditions of competitiveness and replace these criteria with a wish list of collectivist standards and fashionable outcomes. Clueless.