THIS WEEK’S TOP STORIES
Economy: Construction forecast to lead area’s rebound
By Jason Lesley
Manufacturing is not going to solve America’s unemployment problem, Dr. Bruce Yandle, dean emeritus of Clemson’s College of Business and Behavioral Science, told regional business and government leaders Wednesday at a regional economic outlook forum in Litchfield.
He said most American manufacturing will follow the path of agriculture. “You don’t see a person working in a field any more in America,” he said, “but we are the best fed nation in the history of the world. Manufacturing is going to be the same story. In 40 years, we’ll still be the largest manufacturing economy in the world, but nobody will work there. They will contract for all their services: trucking, maintenance and payroll. Manufacturers will be a big box with a small parking lot.”
He told the audience at the annual Waccamaw Regional Council of Governments forum held at Litchfield Beach and Golf Resort that South Carolina has a brighter outlook than its neighbors because of its international manufacturing connections like BMW, Michelin and Bosch. “South Carolina is the fifth most international state in America,” Yandle said.
The greatest growth in the local economy will come in construction over the next two to three years, Yandle said. “The economy still depends on your ZIP code,” he said. Marion County has an unemployment rate of 13.6 percent; Lexington County, 5.1 percent. He predicted housing starts in the Horry-Georgetown-Williamsburg statistical area will rebound by 2016. A minor recession in 2018 will cool off the economy, he added, but it will be nothing like the last recession.
“There will be pockets of prosperity — congratulations on being in one of them — and pockets of despair,” he said.
He discussed factors hampering the U.S. economy.
Regulation is one of the main culprits, Yandle said. “We are putting more pieces of twine and rope on industries,” he said. “It’s always for good reason. You don’t do it for nothing, but it is binding the economy.” He said the paper industry has 40 percent more regulations than it had in 1997.
There are negative incentives built into the economy that keep people on disability who might be able to work, he said. There are about two million people receiving an average of $18,000 a year in disability payments. “They could get an entry level job and take home about $18,000. Why bother? We’ve built a system where people lose all their benefits if they work. We need to taper things.”
The underground economy cheats the U.S. out of billions of dollars in tax receipts a year. It can be measured by how many hundred-dollar bills are in circulation. “A large number of the 8.3 million people listed as unemployed are getting paid with hundred-dollar bills,” he said. “They are driving a new F-150 truck with an $8,000 mower on the back and working for cash. The underground economy accounts for $2 trillion and cheats the U.S. out of $500 billion in taxes. Everybody else has to make that up.” He showed a graph that plotted the shortfall between U.S. government spending and tax collections. The gap was about $500 billion.
He said taxing the rich, as many have suggested, would do little to close the gap. There are a million families with annual incomes of a $1 million or more. He said the highest U.S. tax rate has dropped from 90 percent in 1954 to 33 percent presently. “It doesn’t matter what the rate is,” he said. “The rich hire the best tax lawyers in captivity. We’ve got to close the gap the old-fashioned way: cutting spending and reducing the growth of government.”
Yandle said the emergence of the smart phone will change the world’s economic fortunes. “It will be a different world, not measured in GDP,” he said. “You can sell a new idea to the globe. The rich will get so much richer.”
He said the creation of wealth will not necessarily mean jobs. “There will be an economic boom taking place worldwide, unlike any in recorded history,” Yandle said, “while the U.S. experiences growth of 2 to 3 percent. Over the next 30 years, per capita GDP for the world will increase over 50 percent.”