US, don't aim HIRE & shoot US in the foot

Last week, Republican senator from Ohio Bernie Moreno introduced the Hiring Incentives to Restore Employment (HIRE) Act in the US senate. It seeks to impose a 25% tax on US companies outsourcing jobs overseas. While the objective seems MAGAficent - pushing US firms to hire more Americans - if the bill becomes law, it would be the US shooting the US in the foot Looney Tunes cartoon-style. Outsourcing has allowed US Inc to retain its competitive advantage, which increases its global employment footprint, including in the US. A tax on outsourcing would push the activity outside US jurisdiction through corporate layering. The process will be aided by rising concerns over immigration into the US. In a scenario where global supply chains are being truncated by near-shoring, loss of economic advantage for the US will certainly benefit other countries.

The US has the world's biggest number of MNCs, drivers of global trade in goods and services. Taxing payments to foreign persons whose work benefits consumers in the US would impact the country's trade balance - not in a good way. Tariffs and taxes are borne by consumers, and instead of raising domestic production, they could lower consumption. The results, as economists from across the globe have pointed out, would be a US recession causing serious damage to the world economy.

Automation is rendering tax policy ineffective against employment outcomes. AI, developed primarily in the US, is expected to lead to widespread job dislocation. The early harvest will be among the jobs US companies typically outsource to low-skilled workers abroad. The tax on outsourcing will particularly affect Silicon Valley, which has spread its research infrastructure across the world. AI holds out the promise of higher economic growth, but the picture on employment is unclear. The technology will disperse from the US, where software job losses are routinely making headlines. AI poses the more imminent threat to US jobs than outsourcing. Tax measures, Trump-eteers, should accept the new reality.