A column in the Wall Street Journal correctly explains that Senators Obama and McCain have a habit of displaying economic illiteracy. So it is rather ironic that the author is Karl Rove, the man who spent the past seven years steering George W. Bush into one bad economic decision after another.
On many occasions, I visited economists in the administration to complain about their Keynesian fiscal policy (such as rebates), wasteful spending (such as farm bills and Medicare expansion), and senseless regulation (such as Sarbanes‐Oxley), and invariably I would be told that the Bush White House was pursuing bad policy but that there was nothing that could be done because Karl Rove’s political strategy shop was calling the shots.
Only in Washington can people disply this amount of chutzpah and still retain credibility:
Barack Obama and John McCain are busy demonstrating that in close elections during tough economic times, candidates for president can be economically illiterate and irresponsibly populist. In Raleigh, N.C., last week, Sen. Obama promised, “I’ll make oil companies like Exxon pay a tax on their windfall profits, and we’ll use the money to help families pay for their skyrocketing energy costs and other bills.” Set aside for a minute that Jimmy Carter passed a “windfall profits tax” to devastating effect, putting American oil companies at a competitive disadvantage to foreign competitors, virtually ending domestic energy exploration, and making the U.S. more dependent on foreign sources of oil and gas. Instead ask this: Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn’t Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft’s margin is 27.5 cents per dollar of sales. Call out Mr. Obama’s Windfall Profits Police!
…This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, “I’m very angry, frankly, at the oil companies not only because of the obscene profits they’ve made, but their failure to invest in alternate energy.” …And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux‐based software or McDonald’s in weight‐loss research? Mr. McCain’s angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a “perennial gale of creative destruction” is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is “the pivot on which everything turns,” Schumpeter argued, and “proceeds by competitively destroying old businesses.”
…Messrs. Obama and McCain both reveal a disturbing animus toward free markets and success. It is uncalled for and self‐defeating for presidential candidates to demonize American companies. It is understandable that Mr. Obama, the most liberal member of the Senate, would endorse reckless policies that are the DNA of the party he leads. But Mr. McCain, a self‐described Reagan Republican, should know better.