Topic: Foreign Policy and National Security

Cato Scholars Address Obama’s First Speech to Congress

President Barack Obama’s first address to Congress laid out a laundry list of new spending contained within the stimulus legislation and provided hints as to what will be contained in the budget - a so-called “blueprint for America’s future” - he’ll submit to the legislature. Cato Institute scholars Chris Edwards, Jim Harper, Gene Healy, Neal McCluskey, David Rittgers, John Samples and Michael D. Tanner offer their analyses of the President’s non-State-of-the-Union Address.

Subscribe to Cato’s video podcast here and Cato’s YouTube channel here.

Obama Corporate Tax Nonsense

Last night, President Obama threw in his usual rhetoric about ”ending tax breaks for corporations that ship our jobs overseas.”

I suspect that the president has no idea what he is talking about. The United States already has probably the most burdensome tax rules on multinational corporations of any major country.

Peter Merrill, one of the nation’s top tax economists explained in Tax Notes on Monday:

The United States taxes corporate income on a worldwide basis, including dividends repatriated by foreign subsidiaries, and allows a limited credit for foreign taxes paid regarding those dividends. By contrast, most OECD countries (21 out of 30) have dividend exemption systems under which dividends from foreign subsidiaries are exempt.

In other words, only nine of 30 major industrial countries tax the foreign business profits of their corporations, and the United States does so probably the most aggressively of any.

U.S. corporations are moving investment and profits abroad, but it is because we have the world’s second highest corporate tax rate, not because of special loopholes as the president keeps implying.

It is pathetic that American policymakers sit on their hands avoiding the global tax revolution, while constantly taking cheap shots at corporations, especially when other countries are moving ahead with business tax reforms.

For example, today’s International Tax Review describes possible corporate tax cuts by the left-of-center Australian government:

Australia may have to cut its corporate tax rate in an effort to increase economic growth and attract greater foreign investment, said Ken Henry, secretary to the Treasury.

Henry also noted that a corporate tax cut would increase real wages. What is it about these benefits of corporate tax cuts that American policymakers don’t understand?

Should America Defend Europe if it Won’t Defend Itself?

Iceland, in the midst of economic crisis, is considering closing its defense agency. Reports the Iceland Review:

Former Minister of Justice Björn Bjarnason described the Iceland Defense Agency as “remnants of times past” and said it might even complicate defense relationships with other nations. The Coast Guard should be focused on instead.

It may well be true that Iceland doesn’t have many enemies. But if the Europeans don’t believe they need defending, then isn’t this another good reason to bring home America’s troops? Certainly there’s no reason for the U.S. to defend countries which don’t bother to field militaries themselves!

Senator Lugar: ‘Lift the Embargo and Engage Cuba’

Sen. Richard Lugar (R-IN), the highest ranking Republican in the Foreign Relations Committee, has released a minority staff draft report on U.S. policy towards Cuba. It states that Washington’s sanctions against Havana have failed to bring democracy to the island and it recommends lifting the embargo and engaging Cuba.

The report’s recommendations are very similar to those that Ian Vásquez and I wrote for Cato’s recently published Handbook for Policymakers.

Is Anyone in Washington Listening?

As my colleague Ian Vásquez wrote a couple of weeks ago, Latin Americans are fed up with the war on drugs. The F[ailure] Word is increasingly being used in the region to describe Washington’s prohibitionist strategy. Just take a look at today’s Wall Steet Journal op-ed by former presidents Fernando Henrique Cardoso (Brazil), César Gaviria (Colombia) and Ernesto Zedillo (Mexico).  And last week, Caracol TV, Colombia’s main TV network, started airing a highly-publicized three-hour documentary called “Won Battles, Lost War” on the futility of the War on Drugs in that country. Over the last year, other Latin American leaders have also been calling for a different approach to drug trafficking that range from decriminalization to legalization.

During last year’s campaign president Obama promised to treat Latin Americans as partners. It remains to be seen if anyone in his administration is listening to these calls.