The fact that American workers are grappling with the loss of manufacturing jobs isn’t the fault of China but is due to the U.S. government’s failure to tap into burgeoning corporate profits to improve workers’ plights, a leading economist argued in a CNN column Sunday.
“China is being made a scapegoat for rising inequality in the United States,” economist Jeffrey Sachs charged. The richest 10 percent of Americans in 2018 represented 70 percent of all wealth in the nation, according to a recent study.
China has been playing economic “catch-up” in the marketplace to battle poverty and improve living standards for its residents as any nation would, emphasized Sachs, a world-renowned Columbia University economics professor and public policy adviser. At the same time, American corporations have eagerly sold goods to China’s vast market — and boosted profits by exporting U.S. jobs to Chinese workers earning lower wages.
“Instead of blaming China for this normal phenomenon of market competition, we should be taxing the soaring corporate profits of our own multinational corporations and using the revenues to help working-class households, rebuild crumbling infrastructure, promote new job skills and invest in cutting-edge science and technology,” Sachs argued.
The most “basic lesson of trade theory” is not to stop trade but to “share the benefits of economic growth so that the winners who benefit compensate the losers,” Sachs wrote. “Yet under American capitalism, which has long strayed from the cooperative spirit of the New Deal era, today’s winners flat-out reject sharing their winnings.”
President Donald Trump, with the backing of Republican lawmakers, slashed corporate taxes from 35% to 21%. Sixty of America’s top corporations — including Amazon, Netflix, Chevron and IBM — paid $0 in federal taxes for 2018 under the new law. U.S. businesses contributed the smallest share of federal tax revenue in at least 59 years in 2018, according to the IRS. Individual taxes accounted for 57% of total revenue, and an additional 33% came from employment taxes, Bloomberg reported. Corporations paid only 7.6% of the total tax revenue. After adjusting for refunds, the share may be even lower, Bloomberg noted. Businesses got more than $60 billion back from the IRS.
Whatever the future holds, China’s growing economic power can’t be quashed, Sachs cautioned.
“China refutes America’s pretensions to run the world. The United States, after all, is a mere 4.2% of the world’s population, less than a fourth of China’s,” he wrote. “The truth is that neither country is in a position to dominate the world today, as technologies and know-how are spreading more quickly across the globe than ever before.”
Read Jeffrey Sachs’ full CNN column.