Obamanomics

...Not bad policy...

...There are two problems with this counterpunch...

...The McCain campaign has shown little taste for doing the sort of empirical work on which the Obama team thrives...

...If he ends up a winner in the debates as often as Clint Eastwood did in his fl icks, McCain’s strategy will be vindicated...

...And surely he would be comfortable calling for greater shareholder participation in the approval of executive compensation, and supporting the SEC’s recent efforts to require corporations to report just how they plan to relate executive compensation to performance...

...Or is it...

...The fi rst is that we have no idea whether it is true...

...But even if the numbers don’t support the feasibility of the Obama redistribution, I suspect that point will get lost in the welter of statistical claim and counterclaim...

...Leave that pandering to Obama, who would somehow achieve that goal while at the same time foreclosing drilling offshore and in Alaska, and killing the nuclear option by opposing the opening of the Yucca Mountain nuclear waste repository, without which nuclear plant construction will be minimal...

...No such “independence” is within reach, as the successive failures of Presidents Nixon, Ford, Carter, Reagan, Clinton, and two Bushes to attain it should demonstrate...

...BY IRWIN M. STELZER Every day that passes makes one thing clearer and clearer: Barack Obama knows precisely what he wants to do to the U.S...

...Besides, moving energy policy from the realm of economic policy into the realm of national security can only be to McCain’s advantage...

...Indeed, the Obama proposal arguably increases welfare or, to use the vaguer but more voguish term, “happiness...

...It will be necessary for McCain to show that the recipients of Obama’s $1,000 gift will not be better off, and might indeed be worse off after the income transfer is completed...

...The take-away, as the pros in Washington call it, will be: Obama wants to tax those who have appropriated most of the benefi ts of the recent prosperity and share those benefi ts more fairly with those who have been left behind...

...His economic policies have been aptly described as the politics of personal honor, which is a nice way of saying incoherent...

...There’s a principle here that would permit McCain to favor regulation—regulation that makes mortgage markets work better...

...Surely the populist streak in the Arizona Republican leads him to fi nd something wrong—yes, wrong—with the way executive compensation has become divorced from executive performance...

...At best, he will leave such matters to “surrogates...

...McCain, meanwhile, need not feel stuck with his own oft-stated opposition to drilling in Alaska...

...The transfer of income from one taxpayer to another does not reduce total welfare...

...Finally, he might point out that now that we know we are in a long war with radical Islam, it is more than ever incumbent on us to make painful tradeoffs...

...One such is bearing any environmental consequences of drilling in ANWR, consequences he can continue to regret, in order to achieve the more important goal of depriving Middle East funders of jihadists at least some of the billions now fl owing to them by substituting domestic oil for imports...

...Take that, Barack Obama...

...economy, and John McCain is intent on proving his self-confessed lack of knowledge with a charming set of homilies...

...Nor can this rejiggering of the tax burden be dismissed out of hand...

...Finally, and this would require a leap of political courage, McCain should spend ten minutes with his adviser Douglas Holtz-Eakin, who I would guess is still recovering from his embarrassment at McCain’s call for a cut in gasoline taxes, to discuss the opposite: a tax on oil products, especially gasoline and heating oil...

...The benefi ciaries of the McCain shift in taxes from work to polluting, imported gasoline would see the reduction in taxes immediately— when they received their fi rst salary check after the new regime was in place...

...After all, polls show that the voters know that it is OPEC, rising demand in China, and the refusal of producer countries to allow our companies to develop their resources—not big, bad oil companies—that are responsible for high oil prices...

...No, if McCain is to have an answer it must be based on a demolition of the basic Obama thesis that he can make many people better off by making a few worse off, and a demonstration that the Obama program satisfi es neither the criterion of economic effi ciency nor the (more potent) public notion of what is fair...

...Assuming that there is enough money to be had from taxpayers in that higherincome class to fund the cut for the much larger number of middleincome earners —a heroic assumption— McCain’s charge that Obama is planning a massive tax increase doesn’t apply to this overt redistribution of the tax burden...

...By raising rates on upper income payers, Obama is reducing their incentive to work and take risks...

...McCain might go further, and build on his reputation for opposing earmarks and the worst machinations of the K Street crowd, by abandoning the cap-and-trade system he has been supporting, in part at the urging of his buddy, Joe Lieberman (the man who could have rid the nation of the scourge of Majority Leader Harry Reid, Chairman Patrick Leahy, and the like by voting with the Republicans to organize the Senate...

...McCain can part with Lieberman by pointing out that what seemed sound theory has turned out in practice to represent everything he opposes...

...But the main point is this: The money that the Saudis and other supporters of jihadists would otherwise get would be reducing the taxes of hard-pressed Middle America...

...Economists, and this includes those working for McCain, know that the value (“marginal utility”) of a $1,000 increase in income for someone earning $60,000 per year exceeds the loss in value, even of a greater sum, to someone earning $250,000 and more...

...Second, since the governor of Alaska has announced that she is eager for exploration to begin in ANWR, McCain can in good conscience apply to Alaska the position he has long taken in regard to offshore drilling in Florida and other states—that the decision should be left to those states...

...The political risk of being accused of flip-flopping seems minimal...

...The second is that this is just the sort of exercise that McCain fi nds unappealing...

...It should be possible on the straighttalk express to devise some alternative to the patently cynical promise of “energy independence...

...Taking from Peter and giving to Paul is not an increase in the taking...

...This doesn’t mean abandoning his opposition to higher taxes...

...McCain’s people will undoubtedly work the numbers to see if one can indeed take a chunk from a few Peters and get enough to add a consequential amount to lots of poorer Pauls...

...Indeed, the point is not to raise federal revenues...

...Alas, the precise mechanics by which they will answer questions directed at their candidate during the town hall meetings he is proposing have not been worked out...

...Start with Obama’s proposal to raise taxes on all families earning more than $250,000 per year in order to fi nance a $1,000 tax cut for “middle-income” tax payers...

...He plans to increase their payroll taxes, the taxes they pay on dividends received and capital gains earned, and on any transfers they might have in mind to their kith and kin when they shuffl e off this mortal coil...

...The recent abortive trial run of the cap-and-trade system in Congress showed that it would be a lobbyists’ bonanza, as some interest groups scramble for permits to pollute, and other interest groups insert their snouts into the multibilliondollar trough that would be made available to fund technologies of Friends of Nancy and Harry and assorted bureaucrats...

...Surely, too, McCain knows that paying mortgage brokers based on the quantity of business they generate creates incentives to imprudent lending...

...Perhaps, then, there is some sort of income redistribution with which McCain can be comfortable, the sort that increases faith in the fairness of the market capitalist system of which he is justifi ably so fond, and which has produced greater prosperity for more people than any other economic system...

...The art of governing is the art of making just such tough decisions...

...How could this be...

...If the aggregate of these additional taxes substantially diminishes Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London...

...The voters are ahead of the politicians on this issue, and now lean towards making the most of our domestic resources...

...Every dollar that comes in should be rebated, perhaps by reducing the payroll taxes of everyone earning less than, say, $50,000 per year, the group Obama intends to benefi t by raising taxes on those energetic smallbusiness owners...

...They will therefore likely continue to be a combination of the good, the bad, and the ugly...

...These are not the muchderided speculators, who actually take large risks with their own money, and who are the favorite target of politicians-on-the-make: These are people who have found a structural fl aw in a market, and exploited it while imposing the costs of their activities on society...

...First, he might point out that a policy appropriate when gasoline was selling for $2 a gallon is not appropriate when it is headed towards $5...

...Then there is energy policy...

...It’s called straight talk...

...The income tax increase is not all that he has in mind for them...

...incentives to set up a small business of the sort that has created most of the new jobs in recent decades, the $1,000 tax rebate will be more than offset by the consequences of reduced growth and new business formation...

...McCain has little interest in economic policy, and prefers the sort of intuitive, ad hoc reaction that unfortunately led him to support the continued closure of the Arctic National Wildlife Refuge, and more sensibly to rail against multimillion payoffs to executives who had almost brought their companies to ruin...

...Taxes change behavior...

...He would certainly have a more coherent policy position if he argued that it is important to keep money out of the hands of bad guys, than if he continued attacking oil companies for what he calls “obscene profits...

...So Obama can rightly claim that this one of his several tax proposals does not involve a tax increase, and makes a lot of people much better off at the expense of making a few people only slightly worse off...

...If not, we are in for an expansion of the role of government in economic life that will make Lyndon Johnson look like laissez-faire...

...My best guess is that none of this will come to pass...