This week the headlines blazed with the somewhat misleading news that “everyone in Norway is a millionaire as of today,” because the value of Norway’s Government Pension Fund Global has ballooned to $828.66 billion. Of course, that money doesn’t really individually belong to Norwegians, but it does highlight the fact that, since 1969, Norway has been saving and investing some of its revenue in a “rainy day” fund instead of spending every krone that comes into the treasury.
Even some U.S. states, such as Texas, have rainy day funds where surplus or dedicated revenue streams are stashed to ease the impact of economic downturns. But not the U.S. federal government, which since 1969 has run surpluses in only five years—surpluses that totaled up to $562.5 billion, by the way. But did we save or invest that money? You know the answer to that. That money (and far more) was spent, resulting in a ballooning $17 trillion national debt and an estimated $127 trillion in total unfunded liabilities, the servicing of which will impose burdens on the next generation of workers and taxpayers.
There is no reason why a country cannot live within its means and, in fact, stash away surplus funds as an investment for the future. How much better off would we be if, for example, surplus Social Security funds were being saved and invested toward the future obligations of the system, instead of being swept off the table and spent on other things? The bookkeeping shows that Social Security should be running a $2.8 trillion cumulative surplus this year, but in reality it’s nothing but an unfunded obligation—a bookkeeping entry backed by a taxpayer promise to pay. Our Social Security system is Detroit, not Norway.
Speaking of Detroit, would you rather site your new business in Detroit and pay the 39.1 percent federal corporate tax rate, or site it in Toronto and pay Canada’s 26.1 percent? Tax reform is another area where we should be learning from our competitors.
The U.S. has the highest corporate tax rate among developed countries, 39.1 percent. But the average corporate tax rate among developed countries has dropped for 16 straight years, and today our corporate rate is a full 14 percentage points higher than the average rate among our competitors.
In the U.K., for example, the corporate tax rate is dropping about a percentage point per year, and will reach a low of 20 percent by 2015. Jobs are being created overseas not because job creators are unpatriotic, but simply because they are competent at math.
In a global economy, America must compete. And in many cases, we’re attempting to compete with countries that have adopted more sensible policies that are better suited to a global economy. Having both the highest national debt and the highest corporate tax rate among our competitors is not very competitive strategy for the future.