How To Destroy American Jobs, Wall Street Journal, February

How to Destroy American Jobs,†Wall Street Journal, February 3, 2010, p. A17

Provide a critical review of the article, including the following: (a) The main arguments and conclusions of the author. (b) Your opinion, i.e. whether you agree or disagree with the author. Your argument should be based upon trade theory and the facts that the author is presenting. Your review should be typed and have a maximum length of three pages, single-spaced, 12 point font and Times New Roman.

Paper For Above instruction

The article titled "How to Destroy American Jobs" by Matthew J. Slaughter presents a compelling argument against proposed U.S. international tax reforms aimed at increasing tax burdens on multinational corporations. Slaughter refutes the assumption that higher taxes on foreign operations will lead to domestic job creation, emphasizing instead that such measures could have the opposite effect—destroying jobs and hindering economic growth. His main argument is rooted in empirical research demonstrating that foreign expansion by U.S. multinationals tends to support, rather than displace, U.S.-based employment. He bolsters this claim by citing data indicating that U.S. multinational firms have expanded their employment both domestically and internationally, with foreign affiliate growth complementing U.S. operations. The article further highlights the high corporate tax rates in the U.S., which adversely impact firms’ competitiveness and their ability to invest abroad and domestically. Slaughter concludes that policies restricting the international activities of multinationals could undermine their role in generating high-paying jobs, innovation, and economic growth necessary for recovery from recession.

In my view, Slaughter’s arguments are well-founded and align with the fundamental principles of trade and international economics. The core of his thesis—that foreign direct investment (FDI) and corporate expansion abroad can bolster domestic employment—is supported by trade theory, specifically the concepts of mutually supportive foreign and domestic operations in multinational firms. According to the theory of economies of scale and comparative advantage, firms expand internationally to exploit cost efficiencies and access new markets, which can lead to increased productivity and employment at home. Empirical evidence cited in the article, such as the growth in U.S. employment alongside foreign affiliate expansion, reinforces the idea that international activities are often complementary rather than substitutive.

Moreover, traditional trade theory emphasizes the competitive advantage gained through internationalization, which enhances firm productivity—a key factor in high-wage, high-value jobs. Slaughter’s reference to research by scholars like Mihir Desai and Fritz Foley demonstrates that expanding abroad correlates with increased investment and employment domestically, challenging the narrative that taxation policies solely influence offshoring. Instead, high corporate tax rates in the U.S. diminish firms’ global competitiveness, deterring investment and leading to a potential decline in domestic job creation.

From a policy perspective, Slaughter advocates for maintaining low corporate tax rates and pursuing free trade agreements to foster international trade and investment. This aligns with trade theory, which underscores the benefits of open markets for economic growth. Restrictive tax policies and barriers to trade could reduce U.S. firms' global outreach, diminish their competitiveness, and consequently impair their capacity to create high-paying jobs. Given the current economic context of the recession, with significant job and investment losses, policies that hinder multinationals’ ability to operate globally appear counterproductive.

Nevertheless, it is essential to recognize that concerns about tax avoidance and corporate tax fairness persist, and reforms are often aimed at ensuring that corporations contribute equitably to public revenues. While Slaughter’s analysis rightly emphasizes the economic benefits of multinational activity, a balanced approach may involve targeted reforms that address these fiscal concerns without undermining the growth-supporting functions of multinationals. Additionally, trade dynamics are complex, influenced by geopolitical, technological, and structural factors that also merit consideration in policy formulation.

In conclusion, I concur with Slaughter’s assessment that increasing taxes on U.S. multinationals' foreign operations risks harming the U.S. economy, particularly the creation of high-quality jobs and investment. Trade theory and empirical evidence support the view that foreign expansion is often mutually reinforcing with domestic growth. Thus, policies should favor international openness, competitive corporate tax rates, and strategic trade agreements to sustain economic recovery and long-term prosperity.

References

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• Hines, J. R. (1994). Corporate Taxation and Economic Efficiency. National Tax Journal, 47(2), 229-244.
• Grossman, G. M., & Helpman, E. (1991). Innovation and Growth in the Global Economy. MIT Press.
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