Saturday, January 23, 2010

The True Measure of a Man

Suddenly, things aren't going Obama's way anymore.

Elected into office along with a Democratic supermajority in the Senate, and a majority in the House, it seemed like Obama had a clear mandate to add $1 trillion to our budget deficit with wasteful earmarks and politically-targeted payouts.

Then, when the economy started to turn, he got credit for this stimulus nonsense, even though 2/3 of it still hasn't been paid out yet.

But now that Scott Brown's victory has killed his health-care package, Obama's acting like a petulant child by lashing out at banks and demanding punitive taxes on for-profit institutions that had the gall to make money while the rest of us weren't.

Robin Hood redistribution isn't the answer. The executives of Goldman Sachs and other large banks are paid by their shareholders to make as much money as possible. It is their job, and if they don't do it well, the shareholders will replace them. You are welcome to think that their compensation packages are too big, and I'd agree with you, but that doesn't mean they should donate more than the current 41% tax rate of their bonuses to the government! (Gregg Easterbrook, who I've written about before, favors a 100:1 maximum spread for employees of the same company, so that the CEO cannot make more than 100 times the lowest-paid employee. This is an interesting thought experiment worth some consideration, although I'm scared to death of the slippery slope of government-mandated compensation.)

If the banks and the bankers did something illegal to bring about the crash, then punish them. Prosecute everyone who leveraged beyond SEC limits, who failed to disclose all required information on loans, or who used off-shore accounts to hide underperforming assets. They'll get no sympathy from me.

But, on the other hand, when you're part of a government that deregulated banks to the point where they could leverage their assets at a 50-to-1 ratio, package mortgages into complicated derivative packages and sell them off to other institutions, short the very assets they were selling to their clients, and then provide a predictably easy monetary policy which encouraged these can't now turn around and demand recompense from those who played along with your rules and made a lot of money.

And then, when you bail them out at 100%, don't force any concessions from their creditors, and don't attach any strings to how they spend the bailout money...don't act astonished when they take that money and line their pockets - legally - with it. A punitive tax will not make up for your lack of foresight, and it absolutely, positively, will not create jobs, which is what this country really needs.

The answer remains the same as always. Encourage investment by reducing taxes and spending.

  • Drop every corporate subsidy and tax exemption from the tax code so that everyone is on a level playing field, then cut the overall rate from 35% to 25%. The lower rate would encourage more business in the U.S. while simplicity would allow for businesses to cut costs. 35% remains the second-highest corporate tax rate in the world, at a time when we need more jobs.
  • Get rid of SarbOx, off-shore drilling restrictions, and 40-year-old nuclear power regulations. Homegrown energy = jobs and security.
  • Permanently lower the capital-gains tax and dividend tax. Incent stock market investment so that businesses have more capital to expand and hire, while investors keep more of their money.
  • Simplify the personal tax code, removing most deductions and reducing the marginal rates across-the-board. This is for my Keynesian friends, so I don't get pigeon-holed as a supply-sider. But really, I'm in favor of more money for everyone - except the government.
  • Slash government spending. As politically uncomfortable as this idea is, it's coming whether we like it or not. You saw from this latest crisis how quickly things can go bad. When our bloated government finally collapses under the weight of its debt, it will happen just as quickly. Everyone will think the problem is 30 years away, right up until the moment it happens. The first step is to kill every dollar of the stimulus that hasn't yet been spent.
  • You want healthcare? Bring back the public option, which was really the only good idea in your panoply of ill-conceived notions. Containing costs through competition - that's the answer, not thousands of pages of lobbyist-approved regulations.

No more Robin Hood bullshit, Mr. Obama. No more taxing-the-rich-because-they're-rich socialism. No more back-room deals with the state of Nebraska or insurance company lobbyists. No more juvenile pouting and petulance because your precious healthcare package was shot down. It's time for some Change We Can Believe In.


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