Foreign Investment, Once Seductive, Is Losing Its Spark

Give me your euros, your yen, your investments yearning for a decent return. That’s the message the Obama administration is sending to the world as the U.S. recovery remains investment- and jobs-light.

America’s share of the worldwide stock of inward foreign investment has shriveled to 17% from more than twice that in 2000. Last year, foreign direct investment (FDI) in the U.S. dropped by 28%, and this year it is dropping further. In the first six months it came to a mere $66 billion, compared with $84 billion in the first half of 2012.

The President knows that the jobs created by FDI are generally well-paying and stable. He knows, too, that unless he can do something to step up the growth rate, his party will enter the 2014 congressional elections apologizing not only for the growth-stifling fiasco that is Obamacare, but for a situation in which jobs remain scarce. He is desperate to do something, anything, so long as it does not interfere with the growth of the regulatory state. Perhaps, he must be hoping, foreigners are more credulous than oft-burned home-grown businessmen.

The President’s team is blaming the recent shutdown and the brawl over the debt ceiling for the drop in foreigners’ interest in investing here. They would do better to consider what they are offering foreigners in a country that has one of the highest corporate tax rates in the industrial world. True, we remain a country that is a relatively safe place for foreigners to park their money, but since the President has decided that he can select which laws to enforce and which to ignore, and to rule in good part by administrative decree, industries in regulation-sensitive sectors have to think twice about making major investments here. 

Prospective foreign investors, attracted in part by the prospect of cheap energy, have to wonder just when the President will decide to move against fracking, drying up the supply of cheap natural gas, and how his war on coal, which fuels about half of the electricity generators in the country, will affect electricity prices. Or whether he will succumb to the pressure from his environmental supporters and cut the U.S. off from its principal supplier of oil, Canada. Or what cost-raising measures the administration will concoct in its campaign against global warming.

They also have to worry that the attractive labor market in right-to-work states will be converted into a new feeding ground for the trade unions by the National Labor Relations Board, eroding the competitive advantage America increasingly has over China and other countries with lower labor productivity and rising labor costs.

Then there is Obamacare. If foreign investors can figure out just what the implementation of that revolution in the health care sector will do costs, perhaps they would be kind enough to share that information with the American companies that can’t solve that puzzle, and therefore are holding off on hiring.

“It’s time for folks to focus on doing everything we can to spur growth and create new high-quality jobs,” says a White House spokesman. “We can do better,” the President added last week. Indeed.