Linda Chavez

The president was in full campaign mode this week as he delivered a stump speech on the economy in Cleveland. But the magic is gone. He's no longer the silver-tongued orator who could make us feel good about ourselves and the prospects for our country -- which was key to his victory in 2008. Now he's just another partisan hack blaming the other party for his own failure of leadership.

Instead of changing his tone and rhetoric, the president should be focused on changing his policies. But he seems incapable of any new thinking on what to do about the ailing economy. His only solution is to spend more. He's now touting a new economic stimulus: $50 billion in supposed infrastructure spending, which he's coupled to some targeted tax breaks for businesses. But few people -- including those vulnerable members of Congress in his own party -- are buying his plan, for good reason.

If nearly a trillion dollars in stimulus spending couldn't create enough jobs to drop the unemployment rate to under 9 percent, how could adding $50 billion more for infrastructure improvements make a difference? The problem with the president's new plan is the same as it was with the old one. Government doesn't "create" jobs. Government only grows at the expense of taxpayers, siphoning off money that could be put to better use in the private sector.

Nor is the president's plan to give a few targeted tax breaks to business any more likely to create permanent jobs. The president's plan is just another attempt to micromanage the economy. Instead of enacting an across-the-board tax cut -- or simply keeping in place the Bush tax cuts that are due to expire -- he is proposing specific tax breaks that he hopes will motivate certain kinds of business behavior.

The top corporate tax rate in the U.S. is 39 percent, one of the highest in the industrialized world. Instead of lowering the top rate to that of, say, Germany's or the United Kingdom's, both of which are below 30 percent, the president is proposing to allow businesses to write off certain expenses. He'd like to make permanent a tax credit for research and development, and he'd allow businesses to write off 100 percent of their capital investments in 2011 instead of writing them down over several years.

But businesses don't make decisions about expanding their workforce on the basis of one-year write-offs. If the president had even an iota of business experience, maybe he'd understand that. One-year tax breaks may improve the short-term bottom line for corporations, but successful businesses operate on a longer time horizon. Do the president and his advisers really believe that a company that receives a one-year $5 million write-off will go out and hire 100 new employees as a result? Not likely, especially since the cost of employing those workers will continue to rise long after the tax benefits have disappeared.

A tax rate cut, however, can motivate hiring. If a company knows that its tax bill is going down permanently, it may well be motivated to spend that money in hiring more people or in making capital improvements (which creates jobs for workers employed by other companies). But no responsible CEO would make such a decision on the basis of a one-time credit or write-off.

But cutting taxes is only half the solution. Tax cuts that produce real economic growth lead to higher revenues. But cutting government spending is by far the most important thing we can do to improve the economy. And those cuts need to come at the state and local as well as the federal level. Cadillac pensions and benefits for public employees are bankrupting states like California. And entitlement spending at the federal level must be brought under control -- as painful as it will be to do so. But few politicians in either party want to tackle Social Security or Medicare reform -- Reps. Paul Ryan, Mike Pence and a handful of others in the GOP are the exceptions.

We cannot tax and spend our way out of the current economic mess. American voters understand that. Now it's time for the politicians, especially the president, to get the message.


Linda Chavez

Linda Chavez is chairman of the Center for Equal Opportunity and author of Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics .

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