Commentary

Hurting the Rich Important to Obama

By Sallie James
This article appeared on OCRegister.com on April 22, 2008.

The debate between the Democratic candidates last week proved beyond a shadow of a doubt that voters face a choice between two starkly different visions. Barack Obama made one particularly startling statement that puts him well to the left of the already leftist Hillary Clinton.

In a discussion over whether and how far to increase the capital-gains tax, ABC anchor Charles Gibson pointed out to Sen. Obama that a 1980s hike in the tax actually saw revenue fall, presumably a worry for a candidate who wants to increase government spending on social programs and “infrastructure” projects. Astonishingly, Obama replied: “I would look at raising the capital-gains tax for purposes of fairness.”

In other words, to Barack Obama, soaking the rich and discouraging investment is worth it for its own sake, even if it can’t raise more money. The objective isn’t to raise revenue, it’s to inflict pain on those perceived as relatively well-off.

How could this sentiment possibly satisfy the residents of Pennsylvania, Michigan or anywhere else? If raising tax rates will slow down the economy without increasing government revenue, they probably wondered, what’s in it for them?

In some ways, the debate was more notable for what the candidates didn’t talk about. In spite of a slowing economy and local demographics, trade policy — which has a substantial impact on them — hardly got a mention.

Sen. Obama gave a clear indication of his thoughts in this area earlier last week. In an address to the Alliance for American Manufacturing in Pittsburgh, Obama reiterated his line that trade policies are written to enhance the “corporate bottom line.” As he said, trade policies haven’t worked for America because labor unions haven’t been given a seat at the negotiating table. “Special interests have bought every seat,” he says. (As if unions were not special interests).

Obama lamented the loss of manufacturing jobs and factory closures, and claimed “the few jobs that are being created” bring inferior pay and conditions.

What is there, in all this rhetoric, for Americans? Where’s the hope?

The U.S. economy, over the past decade, has created an average net 1.4 million jobs per year. Sometimes other states offer more opportunities, and when the going gets tough, as they say, the tough get going.

Like many who fret over global free trade, Obama seems to see manufacturing jobs as the pinnacle of human endeavor.”

Sen. Obama did admit that “not every job lost is due to trade.” (According to the U.S. Council of Economic Advisers, it’s about 3 percent.) And he noted that he does not oppose all trade deals. To his credit, Obama voted in favor of the U.S. trade agreement with Oman, and he rightly supports lifting the trade embargo on Cuba.

But more broadly, instead of allowing people to buy goods and services from people who want to sell them, Sen. Obama advocates a government-directed program of redistributing wealth through a National Infrastructure Reinvestment Bank that, he claims, would “generate millions of new jobs.” It might, indeed, create some new jobs, but only at the expense of jobs the private sector could have created responding to actual consumer demand with the money Obama took.

Furthermore, Obama pledged to “modernize our steel industry.” Meanwhile, the American Iron and Steel Institute boasts of its “world-class efficiency and advanced technology.”

Like many who fret over global free trade, Obama seems to see manufacturing jobs as the pinnacle of human endeavor. That’s not surprising, in view of the audience, nor is it surprising that he promised to “strengthen our manufacturing base and open as many markets as we can to American manufactured goods.” But as Obama might learn, it’s difficult to open markets abroad when you don’t open markets here.

After today’s Pennsylvania’s primary will we know how closer Obama is to clinching the Democratic nomination.

As Obama’s remarks on the capital-gains tax make clear, his idea of fairness leaves something to be desired. Harming the wealthy without helping the poor does no good for anyone. It offers only, as John McCain may soon quip, no hope, and bad change.

Sallie James is a trade policy analyst at the Cato Institute.