Big Government, not NAFTA, Responsible for Ohio’s Decline.


During the Democratic primary in Ohio, both Clinton and Obama condemned free trade – specifically asserting that NAFTA was bad for the state’s economy. The Wall Street Journal exposes this fallacy in a column comparing Texas and Ohio. Texas is prospering, in part because there is no state income tax and people have more ability to compete. Click here to read the whole thing; excerpts below.

There’s no doubt times are tough in Ohio. The state has lost 200,000 manufacturing jobs since 2000, home foreclosures are soaring, and real family income is lower now than in 2000. Meanwhile, the Texas economy has boomed since 2004, with nearly twice the rate of new job creation as the rest of the nation. ….Ohio Governor Ted Strickland, a Democrat who supports Mrs. Clinton, blames his state’s problems on President Bush. But Ohio’s economy has been struggling for years, and most of its wounds are self-inflicted. Ohio now ranks 47th out of 50 in economic competitiveness, according to the American Legislative Exchange Council. Ohio politicians deplore plant closings even as they impose the third highest corporate income tax in the country (10.5%) and the sixth highest personal income tax (8.87%). A common joke is that Ohio lays out the red carpet for companies — when they leave the state. By contrast, Texas has no income tax, a huge competitive advantage. …Texas embraces free trade, keeps taxes low, doesn’t impose unions on business and has tooled itself for 21st century global competition. Ohioans may not like to hear this, but for any company considering where to locate a new plant or move an existing one, the choice between Ohio and Texas isn’t even a close call.


2 Responses to “Big Government, not NAFTA, Responsible for Ohio’s Decline.”

  1. March 6, 2008 at 5:31 pm

    A similar piece by Thomas Sowell appeared in Tuesday’s Real Clear Politics. Here it is. Good stuff.

    March 04, 2008
    Rescuing the Rust Belt
    By Thomas Sowell

    It is fascinating watching politicians say how they are going to rescue the “rust belt” regions where jobs are disappearing and companies are either shutting down or moving elsewhere.

    The North American Free Trade Agreement (NAFTA) is being blamed for the jobs going elsewhere. Barack Obama blames the Clinton administration for NAFTA, and that includes Hillary Clinton.

    Senator Obama says that he is for free trade, provided it is “fair trade.” That is election year rhetoric at its cleverest.

    Since “fair” is one of those words that can mean virtually anything to anybody, what this amounts to is that politicians can pile on whatever restrictions they want, in the name of fairness, and still claim to be for “free trade.” Clever.

    We will all have to pay a cost for political restrictions and political cleverness, since there is no free lunch. In fact, free lunches are a big part of the reason for once-prosperous regions declining into rust belts.

    When the American automobile industry was the world’s leader in its field, many people seemed to think that labor unions could transfer a bigger chunk of that prosperity to its members without causing economic repercussions.

    Toyota, Honda, and others who took away more and more of the Big Three automakers’ market share, leading to huge job losses in Detroit, proved once again the old trite saying that there is no free lunch.

    Like the United Automobile Workers union in its heyday, unions in the steel industry and other industries piled on costs, not only in wage rates having little relationship to supply and demand, but in all sorts of red tape work rules that added costs.

    State and local governments in what later became the rust belt also thought that they too could treat the industries under their jurisdiction as prey rather than assets, and siphon off more of the wealth created by those industries into state and local treasuries with ever higher taxes — again, without considering repercussions.

    In the short run, you can get away with all sorts of things. But, in the long run, the chickens come home to roost. The rust belt is where those rising costs have come home to roost.

    While American auto makers are laying off workers by the thousands, Japanese auto makers like Toyota and Honda are hiring thousands of American workers. But they are not hiring them in the rust belts.

    They are avoiding the rust belts, just as domestic businesses are avoiding the high costs that have been piled on over the years by both unions and governments in the rust belt regions.

    In short, the rust belts have been killing the goose that lays the golden eggs. That is a viable political strategy, so long as the goose doesn’t die before the next election and politicians can avoid leaving their fingerprints on the weapon.

    But the people who lose their jobs, and who live in communities that decline, need to look beyond the political rhetoric to the grim reality that there is no free lunch.

    Many workers in the new plants being built by Toyota and others apparently already understand that. They have repeatedly voted against being represented by labor unions. They want to keep their jobs.

    Where does NAFTA come into the picture?

    International trade is just one of the many ways in which the competition of lower cost producers can cause higher cost producers to lose customers and jobs. Technological improvements or better management practices by domestic competitors can have the same result.

    Jobs are always disappearing. The big question is why they are not being replaced by new jobs. Rust belt policies that drove out old jobs also keep out new jobs.

    NAFTA makes it easier for politicians to blame the problem on foreigners. In fact, foreigners make ideal scapegoats for politicians. After all, people in Japan or India can’t vote in American elections.

    Americans who can vote would do well to start spending more time thinking about economic realities, instead of being swept away by political rhetoric.

    Copyright 2008, Creators Syndicate Inc.

    Page Printed from: http://www.realclearpolitics.com/articles/2008/03/rescuing_the_rust_belt.html at March 06, 2008 – 03:31:39 PM CST

  2. 2 Hillbacker
    October 17, 2008 at 9:34 am

    You’re so full of SHIT. Industries in the US and Ohio wanted to put the inferiority of the product in general on the backs of the workers instead of their development teams and take it out of their livelihoods. In the 80s, the US lost its edge on technology, and Japan and China had surged ahead. That’s the fault of the workers? They should bear that burden, that white-collared executives couldn’t compete in think tanks, so throw the laborers to the dogs by cutting pay and benefits? You must be out of your mind. NAFTA screwed us, every one, and the original idea was Ronald Reagan’s. Industry picked up and left Ohio for CHEAP LABOR because greed is always driving that bottom line, nothing else. Of course, it didn’t take NAFTA to send industry out of Ohio, but it did take sleeping on any trade policy which would classify foreign labor-based products as imports and finally, the governmental blessing to turn the collective back on the labor force in the entire nation with white-collar flight to the slums of the world to turn into metaphoric slum-lords.

    You’ll figure out the world once you hit 40.

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