Globalization Sucks -- Jobs, Corporate Profits Out Of America

Remember Ross Perot's grand predictions back in the 1992 presidential campaign that the North American Free Trade Treaty would create a "giant sucking sound" of jobs from the United States? He was at least half right about increasing economic globalization. Not only did America lose jobs, it also lost federally taxable corporate profits.

In reality, our nation lost a lot more jobs to China than Mexico -- three times as many. But the more global our economy has become over the years through various free trade initiatives, the fewer corporate profits that have come back into the country.

"What Perot totally missed was that there would be an even shriller, more devastating sound. This one associated, not with jobs leaving, but with corporate profits moving," writes the Dallas Morning News' Ralph De La Cruz, citing a Washington Post analysis of 30 Dow Jones industrials index companies that experienced falling federal tax liabilities in spite of rising share prices over the past 45 years.

In other words, U.S. corporate tax code has failed to keep place with increasing globalization of corporate America.

U.S.-based multinationals now keep their profits overseas in countries where they're taxed at a lower rate. In addition, they've also benefited from a gamut of tax credits, shelters, etc. from Uncle Sam that have incentivized their flight overseas.  

Concludes DMN's De La Cruz: "That’s not a sucking sound we’re hearing, Ross. More like a flushing sound. Or maybe the quiet whine of a washing machine in laundry mode."

Guess ole Ross isn't the crazy old aunt in the basement after all. Perhaps, we should have locked NAFTA and other globalization efforts there.

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