HBS' Michael Porter: The biggest economic myths from the debate

The first presidential debate failed to tackle key economic issues head-on, according to Harvard Business School (HBS) Professor Michael Porter.

“The debate was disappointing,” Porter said. “It continued a pattern that we’ve seen for multiple election cycles now of the players focusing on dividing as opposed to reflecting on the valid perspectives that have to be put together.”

Porter added the issues were portrayed too simplistically and were too politicized.

“We’re not talking about what the country really needs,” he said. “We’re talking about a political game. We’re talking about how to get people who are confused and angry and uncertain and scared to vote for one or the other. We’re doing it through lack of sophistication in talking about the issues.”

“Let’s focus on what we really have to change and not blame somebody else for ultimately what we all have to do together,” he said.

Instead of blaming one another, Porter said, the candidates should focus on how US workers can compete in the global economy.

“There’s no doubt that people at lower incomes and lower skill levels are the ones that have been taking the brunt of things lately, but ultimately the root cause of that is not evil business … It’s actually our skills training where we are falling behind,” he said.

Porter emphasized eight key issues the candidates need to address, as highlighted in HBS’ recent report on competitiveness.

The state of the economy

Porter explained that the debate moderator, NBC’s Lester Holt, portrayed the US economy as rosier than it actually is when he referenced “a record six straight years of job growth” and incomes that “increased at a record rate.” In reality, Porter said, the US is still well behind despite the recovery since the 2009 recession.

Still, Trump offered few solutions to America’s economic woes, instead making an apparent attempt to appeal to voters’ emotions.

“Our jobs are fleeing the country,” Trump said during the debate. “They’re going to Mexico. They’re going to many other countries. You look at what China is doing … They’re devaluing their currency, and there’s nobody in our government to fight them.”

Blame game: Trade deals

Negative rhetoric surrounding trade deals was high during the debate—Trump declared the North American Free Trade Agreement (NAFTA) a failure. Clinton, meanwhile, defended her disapproval of the proposed Trans-Pacific Partnership (TPP), which she had previously supported.

Porter said politics—simplistic and divisive—has overpowered logic in this category.

“We want trade,” Porter said, crediting Clinton’s acknowledgement of this need. “Ninety-five percent of people live outside the United States. If we just sell to ourselves and we can’t export, we’re not going to do very well as an economy. Trade deals are fundamentally about opening up markets for American exports.”

“On NAFTA, Trump’s just wrong,” Porter said. “There’s no evidence that NAFTA had a disastrous impact on anything in the US economy. On the TPP, I was disappointed with Hillary Clinton—she had it right the first time. The place where we face the most obstacles to trade in America right now that matter the most are in Asia. So that Trans Pacific Partnership that’s finally opening up some of these Asian economies that already have opened imports to the US, those are good.”

Tax reform necessary

Porter emphasized the near-term need for corporate tax reform—given that the US has the highest tax rate in the world—something both candidates support. However, again, the candidates aren’t acknowledging the important nuances of potential reforms, he said.

For example, Porter explained that Trump wants to decrease corporate taxes to 15% from 35%.

“We don’t need to do that—we only need to get it down to around 25%,” Porter explained. “And if we eliminate a bunch of loopholes that allow companies to deduct things that they shouldn’t really deduct, we can actually bring that tax rate for corporations down revenue neutrally.”

The role of business

The way business was portrayed during the debate was negative in many ways; Trump talked about how it was “good business” to take advantage of the 2009 housing crisis while Clinton talked about big business as predatory.

“This is the great paradox of the whole discussion that has emerged in America,” Porter said. “It’s pretty hard to be pro-jobs and anti-business.”

Clinton emphasized small business growth, but Porter explained that elevating all business is key —especially as large businesses create most of the jobs now.

Porter emphasized that we need a “real plan” versus “one or two hot areas to distinguish themselves from the other side.” A number of things need to happen in America, he explained.

“Claiming that it’s just about raising taxes on the wealthy or ending trade deals, that’s just not going to get us there,” Porter said.

The good news? The US decline in competitiveness is largely self-inflicted, meaning we can come back, Porter said. As long as politicians can be honest about how we’re really doing and what really needs to happen—avoiding “simple magic wands.”

For more information on the HBS competitiveness report, please see below:

Harvard economist never thought his new study would take him where it did

Harvard professor identifies the ‘worst nightmare’ in America right now

Harvard study singles out a game-changing economic opportunity: TAX REFORM

There’s a silver lining behind the dark clouds hanging over US businesses

Harvard Business Dean tells us what this huge 5-year study is all about

Harvard Business Dean: The post-crisis monetary policy is ‘running out of runway’

How improved infrastructure could end America’s vicious cycle of poverty

Some companies have taken the next obvious step to filling jobs that sit vacant

There’s one piece of tax reform that would have a real impact with little resistance

America’s outdated education system isn’t producing the workers companies need

Revitalizing small businesses is key to drive America’s economic growth