Zakaria cites FedEx chief’s good ideas, misses their point

Fareed Zakaria should have cut his latest TIME column by a paragraph. Readers still would have been able to read FedEx founder Fred Smith‘s ideas for boosting the American economy.

“There is only one statistic that is almost 100% correlated with job creation,” he says, “and it is private investment in equipment and software.” But what makes companies spend on equipment and software? More orders from customers or a better climate for business? The two are related. Sometimes businesses will simply create products, which then creates demand. Nobody asked for the iPad; Apple just created it. But most of the time, businesses hire workers once they see that customers are ordering their products again.

Smith argues that businesses could be given many more incentives to invest and create products. “Our tax code favors the financial sector, speculation and leverage at the expense of the capital-intensive or the industrial sector,” he says. Smith advocates lowering U.S. corporate tax rates, which are the second highest in the industrialized world. The corporate tax brings in only 8% of federal tax revenue anyway, Smith points out. He also calls for a “territorial tax system,” which would tax only domestic, rather than worldwide, income, bringing U.S. practice in line with most other rich countries’. And Smith supports more incentives for businesses to spend on equipment and software. Right now, because of tax and other policies, Smith notes, “if you have a dollar to invest, you are better off investing that dollar someplace other than the United States.”

But Zakaria could have spared us from his final paragraph, in which he fails to grasp the difference between private-sector investment and government “investment.” At least Zakaria wants the taxpayer money targeted toward infrastructure, though one wonders how an infrastructure-centered government spending — sorry, investment — plan would work better now than the failed stimulus program that was supposed to fund the same types of projects.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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