As I have said in previous posts, “It’s the economy, stupid!”. My primary criticism of the Obama administration
is that when it first came into office it focused too much attention and
political capital on the ideologically-driven health care issue at the expense
of reviving the economy, with the result that we have had a very, very slow and
uneven recovery. Everything flows from the strength of the economy. Better
social services, a stronger military, a more prosperous electorate, more “soft power”
in the world, better education, etc, etc – all these goals, liberal and
conservative alike, come only from a strong economy.
Now the administration is about to propose its new budget,
the keystone concept being to tax corporation more (especially on their foreign
and retained earnings) and use that money to upgrade the nation’s crumbling
infrastructure (roads, bridges, etc). As is so often the case in Washington,
this is a good idea coupled with a lousy idea.
The good idea is to spend government money improving the nation’s
poorly-maintained infrastructure, something that has a direct effect on the
economy.
The lousy idea is to tax corporation more. Yes, it sounds
great, and will no doubt be very popular as a political talking point. But it
shows an amazing level of naiveté on the part of administration policy makers. The corporations that matter – the ones with
lots of earnings one could tax – are almost always global in scope. Make US tax laws too onerous and they will
simply relocate elsewhere to a more tax-friendly nation.
Yes, there is a real problem with corporations moving
US-earned profits offshore to evade taxes, just as there is a problem with
corporations having bought endless other loopholes from compliant members of Congress.
The result is that some huge corporations pay almost no taxes, and that
certainly is unfair.
But the real solution is to revise the tax laws – reduce the
corporate tax level to something competitive in the world market, but also
eliminate almost all the corporate loopholes, tax credits and subsidies that
have accumulated over decades so that corporations actually pay those reduced
taxes. Obama’s proposed tax just piles yet another layer on top of an already Byzantine
tax law (73,954 pages long, as of 2013). And as I pointed out, given enough
incentive corporations can always relocate their headquarters, and many of
their factories and facilities, to a more tax-friendly environment.
But then, most likely Obama never intended to propose
something workable, but rather just something that can be used as a political talking
point in the next election. Having spent 6 years with a “my way or the highway”
approach to bipartisan governing, he now seems more intent on scoring political
points for the next election than in actually achieving anything.
It always amazes me that the liberals who bash business and
want a lot of government spending on social programs never seem to make the ( I
would have thought obvious) connection that the only place to get the money to
support their social programs is from the very businesses they are bashing –
unless, of course they just want to keep borrowing it from their children’s
generation.
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