Topic: Government and Politics

Obama Tax Proposals

Candidate Obama has introduced an array of tax proposals, which he discusses in various places on his campaign website. There are four overlapping themes in the Obama tax proposals the way I see it:

  1. Social engineering.
  2. Discrimination.
  3. Economic micromanagement.
  4. Empty populism.

Under social engineering, I would put Obama’s plan to greatly increase the dependent care tax credit. That would further encourage parents to find institutional day care for their children, rather than providing care themselves.

Under discrimination, I would put Obama’s proposed special tax break for the elderly. The federal fiscal system is already heavily tilted in favor of the elderly, thus it is unclear why Obama would want to further discriminate against the young. 

Obama’s “American Opportunity Tax Credit” also creates unfair discrimination. This new tax break for college essentially increases subsidizes for future lawyers, accountants, and other professionals. Why subsidize these folks who will likely have much higher earnings than factory workers, retail clerks, and others who don’t go to college?

Under economic micromanagement, I would put Obama’s Patriot Employer Act, which provides tax breaks to certain businesses that jump through hoops related to hiring, wages, and other items.  Obama wants to cut capital gains taxes on certain investments and increase capital gains taxes on others, and he is proposing various narrow energy tax breaks. 

Under empty populism, I would put Obama’s railings against “tax haven abuse” and “corporate loopholes.” If Mr. Obama really wanted to reduce corporate tax avoidance–rather than just using it as a campaign prop–he would join with John McCain and call for an across-the-board corporate rate cut.

A final category might be “innocuous tax cuts that do nothing for economic growth.” Here I would put Obama’s $500 payroll tax credit called “making work pay.” If Obama had wanted to spur employment, he should have proposed a cut in the payroll tax rate, which would change the marginal incentive to work, unlike the proposed credit.

In sum, Obama’s tax proposals are pretty awful. It is true that many Republicans and Democrats have proposed similarly bad tax ideas over the years. But Obama can be contrasted with candidate McCain, who thus far has avoided narrow favoritism in his tax proposals, and favors broad-based tax reductions designed to spur economic growth.  

A President Who Knew When to Cast Off the Neocons

I’m reminded that today is the anniversary of Ronald Reagan’s “tear down this wall” speech in Berlin:

It’s a useful reminder that while Reagan included key neoconservatives in his administration, particularly in his first term, most of them always suspected that he was a fool, incapable or unwilling to take the heels-dug-in position that would bring down our Soviet adversaries. Even in 1982, at the height of the neocons’ influence on Reagan and just five years before this speech, neocon capo Norman Podhoretz was accusing Reagan of “following a strategy of helping the Soviet Union stabilize its empire, rather than … encouraging the breakdown of that empire from within.”

I could bore you with umpteen more examples of these sorts of (neo-)conservative denunciations of Reagan, but the man knew an opportunity when he saw it, and wasn’t going to listen to the naysayers and pessimists when they told him it wasn’t so. Reagan by no means got everything right, but on the big questions, he would be a welcome respite from today’s Republican Party, which has been handed over to the neoconservatives in exchange for the mess of pottage that is our Iraq policy.

Civil Liberties in Britain

David Davis, the shadow home secretary in the United Kingdom (that is, the prospective attorney general should the Conservative Party take power), has resigned his seat in the House of Commons to protest Parliament’s approval of a bill that would allow the government to hold terror suspects up to 42 days without charges.

Davis, generally regarded as a Thatcherite, said:

Until yesterday I took a view that what we did in the House of Commons representing our constituents was a noble endeavour because for centuries of forebears we defended the freedom of people. Well, we did, up until yesterday.

This Sunday is the anniversary of Magna Carta, a document that guarantees the fundamental element of British freedom, habeas corpus. The right not to be imprisoned by the state without charge or reason.

But yesterday this house allowed the state to lock up potentially innocent citizens for up to six weeks without charge.

He denounced the bill as “the one most salient example of the insidious, surreptitious and relentless erosion of fundamental British freedom” and went on to cite ID cards, “an assault on jury trials,” and “a DNA database bigger than any dictatorship has” as other elements of that erosion.

Davis said he would run in a special election to reclaim his seat by campaigning “against the slow strangulation of fundamental British freedoms by this government.” Observers expect him to win handily, as the Labour Party has fallen dramatically in the polls. But Conservative leader David Cameron has already appointed a new shadow home secretary, so Davis may have forfeited his leadership role.

I’m reminded of Phil Gramm, a Democratic congressman, who worked with President Reagan and the Republicans to cut taxes and spending in the early 1980s. When the Democratic leadership removed him from the Budget Committee, he switched to the Republican Party. Saying that the voters of his district should have the chance to decide whether they wanted a Republican representative, he resigned, ran in the special election as a Republican, was easily elected on Lincoln’s birthday, and the following year waltzed into the U.S. Senate.

Will Davis find such success by resigning and giving the voters a chance to assess his performance? Only time will tell… In the meantime, you can watch the video of his five-minute speech here.

What Use are Campaign Economists?

An irony of modern presidential campaigns is that they bring on board top tier economic advisors, but that doesn’t stop them from injecting economic nonsense into candidate speeches.  

Candidate Obama just added some skilled economists, but that didn’t prevent him from making ridiculous claims about recent economic policies in a speech yesterday. Take one Obama statement: “our president sacrificed investments in health care, and education, and energy and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs.” Obama is wrong on every point in this remark.

Here are the facts from the federal budget looking at Bush’s first 7 years in office (FY2001 to FY2008):

  • Department of Health and Human Services spending up 67 percent in 7 years of Bush.
  • Department of Education spending up 92 percent in 7 years of Bush.
  • Department of Energy spending up 42 percent in 7 years of Bush.
  • Federal capital investment outlays up 35 percent for nondefense and 131 percent for defense in 7 years of Bush.
  • Federal corporate tax revenues up a stunning 128 percent in 7 years of Bush.

All these figures are available to the Obama campaign in the Federal Budget—Historical Tables. There is no reason for Obama and his advisors to make up nonsense statements about supposed spending cuts, when there are plenty actual failed economic policies that Bush could be criticized for.

Obama Should Learn from King Canute

Legendary tale of King Canute:

“King Canute (995-1035) ruler of England, Denmark and Norway, was surrounded by sycophants. One day, he ordered his courtiers to take him to the sea shore, where he challenged them, saying, ‘Do you believe that I can halt the sea?’ None disputed the fact, so Canute commanded the sea to cease its upwards march. But soon Canute’s feet were covered in water, showing that even he was unable to hold back the tide.”

Legendary tale of candidate Obama:

“I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when… the rise of the oceans began to slow and our planet began to heal.”

Chutzpah

Today’s Washington Times has a long interview with former House Majority Whip Tom DeLay in which he talks about the problems facing the Republican Party and his efforts to help rebuild it. As I have written, there is no doubt that the GOP is facing many problems today, many of them due to the big-government conservatism brought about in part by…Tom DeLay.

This is after all, the same Tom DeLay who:

  • Presided over an unprecedented spending binge by Congressional Republicans. In fact, DeLay was a cheerleader for using earmarks to buy votes for Republican candidates in competitive districts;
  • Twisted arms and threatened dissenters in order to pass the Medicare prescription drug benefit, the first new entitlement program in 40 years;
  • Helped sidetrack Social Security reform;
  • Helped start the “K Street Project,” a cynical exercise in vote buying that led to much of the corruption that plagued Republicans in recent years;
  • Once said that “there is simply no fat left to cut in the federal budget.”

If Republicans and/or conservatives really want to recapture their small government credentials, the might start by ignoring Tom DeLay.

No Need for a General Election; Obama Already Has Mandate

An article [$] today in CongressDaily AM outlines the plans of trade-skeptic congressional Democrats wishing to formalize that “time-out” on trade we’ve heard so much about during the Democratic primary campaign.

A bill introduced yesterday (H.R 6180 and its companion S.3083) would slow down the process of approving new trade agreements by requiring the GAO to review existing agreements and judge them not, as logic would seem to dictate, according to the standard of increasing trade, but against the domestic policy standards contained in the bill:

The bill would require GAO to review existing trade deals by June 10, 2010, and an analysis of how the deals stack up against labor, environmental and safety standards enumerated in the bill.

If gaps are found by GAO, the president would be required to submit renegotiation plans for current trade pacts before negotiating new ones and congressional consideration of pending trade pacts. Committees of jurisdiction would then review the renegotiation plans.

According to congressional Democrats, Senator Obama’s win in the Democratic primary is justification enough for introducing a bill that mirrors his plans. Those plans include, yes, loading up trade agreements with possibly deal-killing standards and, at least judging by Senator Obama’s voting record so far, very little new trade liberalization (details here).

If that sounds like a bad idea, it is music to the ears of some members of Congress. Here’s a quote from Rep. Michael Michaud (D, ME):

“I feel very comfortable with Sen. Obama’s position on trade; he understands the devastation that trade has caused to the American people and how flawed these trade deals are.”

We at Cato’s Center for Trade Policy Studies would refute that. Strenuously.