Obama’s Grand Bargain; No. . . He’s not Resigning

Michael Schaus
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Posted: Jul 31, 2013 12:01 AM

It seems that the biggest problem for America’s economic recovery, is the President’s inability to understand the genesis of job creation. As part of his “pivot” toward the economy (You know: the economy he has presided over for the last five years) Obama has declared a “grand bargain.” It may be a bit premature, however, to call his latest scheme a “bargain” given that Republicans have not yet signed on, and details have yet to emerge. Nonetheless, the media obliged with headlines declaring his economic outline as the great bipartisan proposal of our lifetime.

In short, here’s what Obama’s teleprompter instructed him to say:

"Right now, our tax code is so riddled with wasteful loopholes that many companies doing the right thing and investing in America pay 35 percent, while the corporations with the best accountants stash their money abroad and pay little or nothing at all. I’m willing to simplify our tax code in a way that closes those loopholes, ends incentives to ship jobs overseas, and lowers rates for businesses that create jobs right here in America."

Basically, the President suggested that we (government) should lower the corporate tax rate to 28 percent, while closing loopholes, increasing various business taxes, and creating a new minimum tax on foreign income and investment. If you are not yet skeptical, it’s because you haven’t heard the best part. The President is hoping that these moves will increase revenues enough to allow the creation of millions of government “shovel ready” jobs. So. . . Get the shovels out. Our economy’s grave isn’t going to dig itself.

If a call for lower taxes sounds like a teleprompter malfunction more than an honest declaration from our liberal President, that’s because there’s a catch. Liberals have a nasty habit of asking for lower taxes while increasing taxes on other groups, or in other areas.

Without access to details (because details have not yet been outlined by “the most transparent” administration in history) it is impossible to say for certain that this is a bait and switch. But, what the heck. . . Let’s give it a shot anyway:

A lowering of the corporate tax rate from 35 percent to 28 percent would be a very welcomed move. And if it was done with any sense of good faith, that move alone might be enough for Republicans to adopt the self-proclaimed “bargain.” However, keep in mind that the President recently raised the top marginal personal income tax rate to 39.6 percent. While it seems redundant to mention, most small businesses file under the personal rate. This means that while those greedy corporations get a rate reduction, small businesses, mom and pop stores, and new startups will be paying nearly 40 percent taxes. Where’s Occupy Wall Street? Where are all those Democrats that care about “the little guy?”

Furthermore, Obama wants to tax American companies more for the money that they earn, keep, or invest (he seems kinda fuzzy on the details at this point) in foreign nations. Efforts to double tax, or further regulate, foreign investment will do many things to business patterns. . . But it won’t repatriate any income, or jobs. This will only increase business’s attempts to avoid taxable vehicles, and further deplete their presence in America. Such a taxing attempt on foreign income will only further burden corporations with tax compliance (and avoidance) efforts – raising their cost of doing business here in the US. It doesn’t matter how you slice it: Ireland’s flat 12 percent tax would still be better than America’s complicated and punitive 28 percent.

The proposals, as outlined so far by Obama and his administration, promise only to complicate the tax code further. One would think that at 74,000 pages, there might be some willingness to simplify the code. Between the various “business taxes”, foreign investment/ income taxes, and our already increasing burden of regulations, nothing about the President’s plan promises to simplify or ease the process of creating wealth (and therefor jobs) in the US.

And all of this complication, double speak and “revenue generation” for the sole purpose of spending more money on Job Creation. Which, by the way, seems to be a major tip off that something is not right with the President’s proposal. If the President expects his “bargain” to increase revenues, you can bet he’s planning on extracting more capital from corporations than Treasury is currently extracting. Either the President is expecting his “reforms” to increase direct taxes paid to Treasury, or he has suddenly had a change of heart and agrees with Reagan, JFK, George W Bush, Grover Norquist, the Cato Institute, and me: Lower taxes increase revenue. If he believes that, why aren’t we lowering everyone’s taxes? (Including the small businesses that are set to pay 40 percent under Obama?)

But, I digress:

President Barack Obama is selling his plan, in typical campaign fashion, as a way to create jobs. Of course when this President speaks about creating jobs, he’s referring to infrastructure building, roads projects, and government “fill-in-the-whole-you-just-dug” projects. (Think about the stimulus plan of 2009.)

And therein lies the largest obstacle to true economic recovery in the age of Obama. He feels that only government is capable of creating prosperity. (After all, every penny of his wealth is a direct consequence of government’s expansion.) Obama has no experience, or interest, in the private sector. Being completely unfamiliar with budget concerns, profit margins, and other burdens placed upon businesses of any size, he has no understanding of what is needed for the private sector to grow.

An employee’s value to the company should be greater than the monetary value of their income. This is a basic, fundamental concept that eludes the White House.  The cost that employers suffer as a consequence of somebody’s employment, must be outweighed by the additional profits accumulated as a consequence of the employee’s efforts. With government jobs, no such consideration is taken into account. A job created by government is immune to market concerns, and therefore the money utilized to create a government job is (potentially) more erroneously invested than had it remained with a private company in search of growth and expansion.

Capitalism, and relatively free markets, are the greatest and most successful anti-poverty programs ever attempted. And yet, this President insists on redistributing wealth, rather than creating it. Obama’s “grand bargain” is neither “grand” nor a “bargain.” If the last five years of his Presidency is any guide, his proposal will be a thinly veiled attempt to resell used and tried progressive ideas. And far from being a bargain it will prove to be – like Obamacare, the Stimulus, and his tax increases – grossly overpriced.