Obama’s plan: Tiny, tar­geted, tem­po­rary

The Washington Times Weekly - - Commentary -

Who would have re­ally ex­pected a 300-point stock mar­ket plunge on the day af­ter Pres­i­dent Obama’s so-called jobs speech?

Yes, wor­ries over new fears of a Greek de­fault ripped through the mar­kets on Sept. 9. As did fears of an al Qaeda bomb­ing plot on the 10th an­niver­sary of 9/11. But you can’t help but think that at least some of the stock plunge is a sig­nal of no eco­nomic con­fi­dence in Obama’s plan.

And for that mat­ter, who re­ally ex­pected an un­be­liev­ably large $450 bil­lion plan? That’s way more than 50 per­cent of the orig­i­nal $800 stim­u­lus pack­age in 2009, which did not work.

Leaked re­ports lead­ing up to the speech sug­gested a $300 bil­lion plan, al­ready way too big. But At a time of

deficits and debt? And a How is this go­ing to be paid for? That’s what many folks want to know. Obama didn’t tell us.

In very round numbers, the pack­age comes to $250 bil­lion of tem­po­rary pay­roll tax cuts of one kind or an­other, with an­other $200 bil­lion in new spend­ing on in­fra­struc­ture, un­em­ploy­ment ben­e­fits, and di­rect aid to state and lo­cal gov­ern­ments.

But didn’t we learn from

$450 bil­lion? mas­sive


Obama Stim­u­lus One that more govern­ment spend­ing doesn’t grow the econ­omy or re­duce un­em­ploy­ment?

And while more than half of the pres­i­dent’s new pack­age is called “tax cuts,” the re­al­ity is that these are tax cuts.

Even though tax rates are re­duced for both em­ploy­ers and em­ploy­ees, it’s just for one year.

That blunts the true in­cen-


tive im­pact of the tax cuts. Busi­nesses like to look ahead at least three to five years for their em­ploy­ment plan­ning. And they’re al­ready wor­ried about the tax and reg­u­la­tory man­date costs of Oba­macare, which has be­come a great de­ter­rent to job cre­ation. But no­body makes clear busi­ness de­ci­sions based on tem­po­rary one-year tax cuts. That’s not the way busi­ness works.

The only true in­cen­tive ef­fects come from per­ma­nent, econ­omy-wide re­duc­tions in tax rates. And that’s what’s been miss­ing all along from Team Obama’s think­ing.

For ex­am­ple, it is quite pos­si­ble that some new jobs will be cre­ated in elec­tion-year 2012 as a re­sult of the tem­po­rary pay­roll tax cuts. But those jobs will be bor­rowed from 2013, when the econ­omy risks ex­pir­ing as the tem­po­rary tax cuts go away.

So this be­comes a very ex- have been a lay-up. The whole world wants it. But not the White House.

Out on the cam­paign trail, Mitt Rom­ney, Jon Hunts­man, Rick Perry and other GOP can­di­dates are talk­ing about fun­da­men­tal tax re­form for in­di­vid­u­als and busi­nesses, the kind that can pro­vide the per­ma­nent in­cen­tive ef­fects needed to su­per­charge the econ­omy. But not the White House.

At bot­tom, the pres­i­dent’s plan is a big-govern­ment plan. It’s not a pri­vate-sec­tor plan. If left to its own de­vices, Amer­ica’s free-mar­ket cap­i­tal­ism will pro­duce growth and jobs. But it won’t hap­pen in a tar­geted and tem­po­rary straight jacket.

pen­sive ex­er­cise, one that will yield very lit­tle or noth­ing in the way of per­ma­nent job cre­ation or eco­nomic growth.

The pres­i­dent does talk about cor­po­rate tax re­form, but he has no specifics on it.

He never men­tions the taxfree repa­tri­a­tion of $1 tril­lion in over­seas prof­its booked by U.S. firms, or for that mat­ter a ter­ri­to­rial busi­ness-tax ap­proach that would stop the dou­ble tax on for­eign earn­ings.

This repa­tri­a­tion idea would

And out in the busi­ness com­mu­nity, ev­ery­one is talk­ing about a reg­u­la­tory mora­to­rium, or roll­back, to lower the cost struc­ture of do­ing busi­ness. But Obama only talks about this in the vaguest terms.

Stop the NLRB and EPA. Hold back on Dodd-Frank and Sar­banes-Oxley. Pro­vide con­fi­dence on taxes and reg­u­la­tions for the whole pri­vate-in­vest­ment sec­tor.

Nope. Not the White House. Pres­i­dent Obama’s lat­est vi­sion on taxes once again sin­gles out en­ergy com­pa­nies, suc­cess­ful high-end earn­ers, and small­busi­ness en­trepreneurs for fu­ture tax rather than across-the-board rate-flat­ten­ing and de­duc­tion-end­ing.

The best part of the Obama’s speech was the seg­ment about free-trade agree­ments with Panama, Colom­bia and South Korea. But some­how this never gets done.

As for in­fra­struc­ture spend­ing, it has its place (though not a Fan­nie Mae-like bank). But Amer­ica needs new in­cen­tives to pro­pel en­trepreneur­ship and dy­namism for brand-new busi­ness start-ups and tech­nolo­gies. And throw­ing more money at state and lo­cal-govern­ment unions is just a pa­thetic po­lit­i­cal bailout.

What we re­ally need is a long-term pro­gram that gets govern­ment out of the way and low­ers spend­ing, tax and reg­u­la­tory bar­ri­ers wher­ever they ex­ist. But at bot­tom, the pres­i­dent’s plan is a big-govern­ment plan.

It’s not a pri­vate-sec­tor plan. If left to its own de­vices, Amer­ica’s free-mar­ket cap­i­tal­ism will pro­duce growth and jobs.

But it won’t hap­pen in a tar­geted and tem­po­rary straight jacket.

hikes, Lawrence Kud­low is a na­tion­ally syn­di­cated colum­nist.

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