Economic Growth: You're Making It Too Hard, Mr. President

Rob Schwarzwalder
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Posted: Jan 25, 2011 12:01 AM
Economic Growth: You're Making It Too Hard, Mr. President

Recently, President Obama appointed GE chairman Jeffrey Immelt to chair the President’s Council on Jobs and Competitiveness.

This is a fascinating pick, and represents two serious problems for the Obama Administration.

One of these has to do with the impossible marriage of conflicting ideologies: One cannot simultaneously be for the private sector while attempting, repeatedly and in many diverse ways, to hobble it.

That’s the impossibly confused message of President Obama in recent months. He assailed a supposedly shadowy “corporate takeover of our democracy” – he actually said this – in a radio message last April. Now he’s hired one of corporate America’s leading executives to help his business-lite White House figure out how to encourage economic growth.

In Immelt’s op-ed in last Friday’s Washington Post, he argued for many of the things that make an economy sound: a strong manufacturing base, technology innovation, what he called “a sound and competitive tax system,” etc. (I assume by this latter he means a tax code that does not deter America’s ability to compete in the global economy).

All good. Yet he has now agreed to partner with a man who recently has enacted federal controls over the health care system, imposed a higher level of debt on his fellow citizens than any President in American history, refuses to enact a productive trade agreement with Columbia, appoints people to his Administration for whom the administrative state is a moral necessity, and insists on a vast regime of environmental and other regulations that would cripple our economy and suffocate the kind of growth the President says he wants.

Of particular interest is “climate change czar” Carol Browner’s past relationship with GE: According to the Manhattan Institute’s Max Schulz, “Browner was the driving force behind the federal government’s effort to force GE to spend $490 million to dredge New York’s Hudson River to rid it of PCBs that – because they were buried under layers of silt – posed no environmental harm.”

I wonder if Browner and Immelt will carpool together.

Browner has also been a member of the Commission for a Sustainable World Society, a recognized component of the Socialist International. This is not scare-mongering; it’s a simple fact.

Mr. Obama is in the thrall of Big Labor, and his “war on the rich” in rhetoric and policy helped tamp-down economic growth as investors wondered what would hit them next.

The President cannot have it both ways: he cannot despoil open market capitalism while now, and rather suddenly, claiming to love it.

This exposes a second problem. The President says he hired Immelt to lead his new Council in order to lead in “finding new ways to encourage the private sector to hire and invest in American competitiveness.”

Innocent sounding as this is, this phrase represents a second concern: the simple fact that there are no “new” ways to create jobs and foster investment, only known ways the President finds distasteful.

The means by which jobs are created are not cryptic. They are not found on some mysterious inscription on a tablet lying amidst the ruble of an ancient city. We need a coherent, predictable, non-adversarial tax code. It should reward innovation (e.g., the R&D tax credit), foster investment (e.g., a deduction for dividends), recognize the linkage between small and large businesses (e.g., GE has thousands of small business suppliers – many of which are affected by a cruel death tax), provide business with the means of training employees with technology improvements (credits for employee education and re-training), etc.

The tax code should also be sufficient to fund only the legitimate needs of the federal government, whose appetite is enormous and requires the joint disciplines of restraint and accountability. And it should recognize that the two-parent family is the foundation for economic growth: Without children, we have no country (and, thus, we should encourage tax credits for minor children and for adoption).

We also need an educational system that prepares students for the challenges of the high-tech workplace (speaking of competitiveness, Mr. President, ever heard of education tax credits?). We need litigation reform, sound trade policies, and a regulatory regime that, while constraining excess, is not the vast impediment to growth and opportunity it now is.

Sadly, President Obama has resisted many of these things, instead imposing on the health system and the private sector that supports it so many new rules that they discourage entrepreneurship and expansion. His confidence in the unique ability of the federal government to staunch economic decline is so profound that in 2009-2010 he, with his allies in the then-Democratic majority Congress, overspent with an energy unique in American history.

With no serious commitment to reforming entitlements nor any seeming interest in understanding how the economic world really works, with typical professorial judgment the President has now turned to an “expert” – Jeffrey Immelt – to help him where he has failed. No expert is needed, only common-sense reflection on what works.

Such reflection has been forced upon Mr. Obama given the tepidity of his economic policies and the “shellacking” a fed-up public gave him and his party last November.

Thus, although relishing his pose as the great conciliator, the man who stands above the pettiness of political faction, Mr. Obama is being confronted by the fact that such active federal interventions as stimulus spending and micro-, or “targeted,” tax reductions are ineffective.

This is political heresy for someone whose public life is premised on the notion that he and his elite friends know best and must educate the frightened, slow-witted masses about what is good for them.

An occasional and uncomfortable spasm of intellectual honesty – in this case, that the market works without undue federal manipulation or guidance – provides Mr. Obama with no substitute for broad-based policies, applied consistently, that will allow the creativity and energy of the American people to foster the robust growth the President says he wants.

Given his philosophical presuppositions and his political indebtedness to the Left and its unions, this scenario is all but impossible, Immelt or not.