Invasion of the Wallet Snatchers
CONTINETTI, MATTHEW
Matthew Continetti confi rms your suspicions about Obamanomics: You, your children, and your children’s children will be stuck paying the bill. Hello and welcome to Advanced Obamanomics at...
...And unlike Bill Clinton, Obama has nary a positive word for free trade in general, even though it has produced undeniable benefi ts for Americans and people worldwide...
...But the end of the economic world as we know it— this only a slight exaggeration—is exactly what might happen if Obama follows through on two other aspects of his economic agenda...
...And the economy, you may recall, wasn’t exactly Clinton’s weak spot...
...Bush promised he wouldn’t raise taxes...
...When did the world understand Ronald Reagan was serious about ending stagfl ation...
...But they just might, because Obama has shown no sign of breaking with the unions on any issue...
...and Robert Kuttner’s Obama’s Challenge...
...The wars in Iraq and Afghanistan could worsen...
...He’s going to raise federal income taxes on families making more than $250,000 a year...
...The larger point of this quiz is to illustrate just how unpredictable politics is...
...One hopes Goolsbee was right...
...As noted in the syllabus, the required reading for today’s class includes The Audacity of Hope pp...
...Let’s take a brief look at each...
...It’s often forgotten, today, how FDR campaigned for the presidency as a budget balancer who was going to rein in federal spending...
...The economy could worsen...
...And Obama would tell him, politely, to go jump in a lake...
...FDR ran as a fi scal conservative...
...They are likely to suggest that Obama adopt, by and large, the economic policies of the Clinton years, with perhaps a little less focus on defi - cit reduction...
...Union participation in the private sector has been on the decline for decades and, not coincidentally, during this same amount of time, on average, productivity has skyrocketed while unemployment has plummeted...
...And while Obama may be a liberal who spent his youth as a leftwinger, he has plenty of nice things to say about the free market...
...220-257...
...And this is another not-so-bad part of Obama’s economic agenda, namely, the left isn’t thrilled...
...But don’t bet on it...
...He’s going to raise capital gains and dividend taxes...
...Correct...
...Congratulations...
...And during the Democratic primaries, Paul Krugman was a fi erce critic of Obama’s health care plan...
...But other times his steadiness works well...
...Sometimes those outcomes will be perverse...
...They have no history of pushing the envelope...
...His cap-and-trade proposal includes a private auction for carbon permits in order to avoid rent-seeking and corruption...
...He would apply a similar logic to education, mortgage interest, savings, child care, and hybrid car credits...
...The global trading system has already reached an impasse, with rich countries unwilling to end agricultural subsidies and level the playing fi eld for farmers in poor countries...
...Unions produce frozen labor markets, which increase unemployment and class stratifi cation while lowering productivity and economic growth...
...This has sometimes been a liability, since his supporters are constantly urging him to ramp up the attacks on Bush and McCain...
...During the Democratic primaries he called for renegotiating NAFTA...
...It’s rare that you see him ruffl ed in public...
...For the sake of the U.S...
...He wants to make 401(k) savings programs mandatory and automatic...
...He’s cautious, calm, and even mellow...
...It’s possible to divide Obama’s economic agenda into three parts: the Not-So-Bad, the Bad, and the Really, Really Bad...
...A conservative economist would tell Obama, politely, that effective tax reform is fl attening the tax rates while broadening the tax base...
...Stuff happens...
...Who said the following...
...Richard Thaler and Cass Sunstein’s Nudge...
...George W. Bush said the United States ought not to “nation build...
...And if he were to implement anti-trade policies—tariffs and other protectionist measures—the result could be a trade war that would raise prices, kill jobs, and increase enmity between nations...
...Obama wants billions in new spending, and, if the Bush presidency is any indication, he won’t stop Democrats in Congress from spending even more...
...As Professor Barnes likes to say, the future is never a straight-line projection of the present...
...So it’s hard to give them a tax “cut...
...He’s suggested lifting the cap on income subject to the payroll tax...
...David Leonhardt’s indispensable August 24, 2008, New York Times magazine article “Obamanomics,” from which the title of this class is drawn...
...George H.W...
...former Fed chairman Paul Volcker, who, alongside Ronald Reagan, helped crush infl ation in the early 80s...
...I regard reduction in federal spending as one of the most important issues of this campaign...
...He could urge the Democrats who run the legislative branch to pare down their grand designs and outrageous expenditures...
...This is not, despite what your Teamster friends might tell you, a good thing...
...It’s true Obama would eliminate capital gains taxes for “start-ups and small businesses,” although he hasn’t said how he’ll distinguish between actual start-ups, and companies— General Motors, say—that will call themselves start-ups for tax purposes...
...Also, your check has cleared...
...If he becomes president, Obama’s temperament will be a plus...
...And the new spending, combined with the loss in revenue from an economy in recession, will increase the defi cit...
...So, as we examine Obama’s economic policy proposals, we ought to look at them with a skeptical eye...
...He wants to take the federal tax code and carve out all these credits and exemptions so that the overall tax burden becomes slightly more progressive, and more government benefi ts fl ow to the middle class and poor...
...Number One: “I accuse the present administration of being the greatest spending administration in peace times in all our history...
...Many of the proposals won’t become law...
...He’d rather have Obama transform America into Denmark...
...These are not revolutionaries...
...He is not going to collectivize agriculture or nationalize the banks...
...One can see how the opportunities for graft, fraud, and intimidation under this sort of scheme would be enormous...
...The fi rst is his opposition to free trade...
...And this would be an absolute disaster...
...When he fi red the air traffi c controllers and broke their strike...
...And the democratic ideal of the secret ballot would be undermined...
...He’d like to tax “carried interest” as private income...
...former Clintonite Laura Tyson...
...Obama’s chief economic adviser, Jason Furman, is a prot?g...
...The United States could become involved in new confl icts in Darfur, Iran, Pakistan, the Korean peninsula, Taiwan, or someplace no one has ever heard of...
...There are, however, a few basics we can take for granted...
...Others will be modifi ed beyond recognition...
...Obama’s gradualism, moreover, could serve as a check on a liberal Democratic Congress...
...Not a pretty picture...
...Obama’s higher taxes will therefore result in less investment and risktaking on the part of the wealthy, whose capital fi nances new companies that create jobs...
...Another adviser, University of Chicago economist Austan Goolsbee, got into some trouble earlier this year when, it was reported, he told a group of Canadians that Obama didn’t really mean all the nasty things he was saying about NAFTA...
...He may praise free trade in interviews with the fi nancial press, but he clams up when faced with a large crowd...
...Obama attacks “companies that ship jobs overseas,” but he doesn’t have much else to say about the global economy...
...THE REALLY, REALLY BAD Still, it’s unlikely Obama will raise tax rates to the point where they distort incentives to work, invest, and produce, as they did during the 1930s and the 1970s...
...And the unions’ politically negotiated wage gains also encourage infl ation...
...But it’s still not quite accurate to call Obama a tax cutter...
...Democratic economists will tell you Obama knows better and is just saying what’s politically expedient...
...And don’t forget Putin...
...A President Obama could demonstrate similar independence and fortitude by vetoing card-check...
...Such is life...
...As long as parts of the left are angry at Obama, he can’t be all that bad...
...Now, most of your classmates probably spent last night experimenting with the booze luge they had constructed out of plywood and a bag of crushed ice...
...The outcome of many policies will be unrelated to their author’s purpose...
...It’s axiomatic, however, that when you tax something you get less of it...
...As taxes on the rich go up, the income threshold at which one becomes “rich” is likely to go down...
...It’s another form of spending...
...He’s going to raise the corporate and estate taxes...
...Card-check is an ugly piece of work...
...But this is misleading...
...This is not the only tax credit Obama would make fully refundable...
...Card-check would also lead to a rapid jump in unionization...
...Hello and welcome to Advanced Obamanomics at WEEKLY STANDARD U. If you are in this class, you have passed Remedial Rubinomics, Identity and Globalization in the Works of Barack Obama, and Introduction to Contemporary Religion with Professor Jeremiah Wright...
...Woodrow Wilson ran for reelection on a peace platform...
...For example, his tempered response to the current economic crisis has been rewarded in recent public opinion polls...
...Number Two: “The market is the best mechanism ever invented for effi ciently allocating resources to maximize production...
...and global economy, Obama can’t allow the AFL-CIO and other unions to dictate trade policy...
...He claims he’s a “pragmatist,” but he’s actually a gradualist...
...Obama’s economic advisers aren’t so bad either...
...What Obama is actually proposing is a refundable tax credit—it’s unclear whether it’s a one-shot deal or permanent—of $500 per person...
...But, as the saying goes, conservatives should always prepare for the worst, because they ought to expect nothing less...
...And the whole darned thing will be extremely diffi cult to roll back...
...This is true in life, culture, economics, and politics...
...And speaker number two is presidential candidate Barack Obama, campaigning in 2008...
...Talk about a profi le in courage...
...That means an already complicated tax code is about to become even more complicated...
...His team might not include any supply-siders, but it does contain, almost exclusively, centrist Democrats who are sympathetic to markets...
...Obama’s March 27, 2008, speech in New York City on “Renewing the American Economy...
...The credit will be, in David Leonhardt’s words, “applied toward income taxes based on payroll taxes paid...
...This means that there is a bright future in store for you at either the Bureau of Labor Statistics or the Congressional Budget Offi ce...
...THE NOT-SO-BAD Obama is a cool character...
...And I also think that there is a connection between the freedom of the marketplace and freedom more generally...
...It thought Furman too centrist...
...He doesn’t go for one-size-fi ts-all solutions...
...Good thing you didn’t miss this incredible opportunity by going to last night’s underwear party, getting wasted, and setting a couch on fi re...
...Buffett couldn’t be exciting if he tried...
...Al Qaeda could strike again...
...Obama has said he would sign the so-called “card-check” legislation that Congress will undoubtedly consider, and probably pass, next year...
...The legislation would eliminate the secret ballot in union elections and allow the bosses to unionize a shop once a certain number of names had been written down on a card...
...And that income tax hikes on the wealthy are going to fi nance benefi ts for some people who don’t pay any income tax at all...
...You, however, made it through the required reading without—and this is no small feat—falling asleep...
...For those of your who arrived late to class—don’t think I didn’t notice—here’s the CliffsNotes version of today’s lecture: Obamanomics equals higher taxes, more government spending, a larger defi cit, a more complicated tax code, increased regulation, a slowdown in global economic integration, and the resurrection of the labor unions, all brought to you by a cool-headed gradualist with a team of brilliant advisers...
...A corollary is that presidents almost never govern in the manner in which they campaigned...
...and of course megainvestor Warren Buffett...
...Meaning that everyone who pays payroll taxes will get $500...
...Other Obama advisers include the aforementioned Rubin...
...It’s more likely he’ll cave, and the economy and labor-force democracy will suffer the consequences...
...John Cassidy wrote that—and he did not mean this as a compliment—Obama “appears to be unduly infl uenced by the need to preserve choice...
...We’d have an anti-free trader in the White House for the fi rst time in decades...
...Obama is more of a tax carver...
...Still others will be cast aside, as unforeseen developments force the rejection of old ideas and the adoption of new ones...
...There are plenty of economists and journalists who argue Obama isn’t left-wing enough...
...He might even veto a spending bill or two, although that’s probably asking too much...
...Robert Kuttner worries Obama will turn his back on “transformative” politics in favor of Clinton’s balanced-budget economic stewardship...
...If your federal income tax burden is less than $500, you’ll get the balance via government check...
...Plenty of Americans pay very little, or absolutely no, federal income tax...
...This is the wrong thing to do during a recession, but Obama and the Democrats in Congress will do it anyway, which probably means that the economic downturn will last longer than it ought to...
...The markets need to see confi dence in the political leadership...
...The Bush administration has already done that anyway...
...It’s true that, under Obama’s plan, seniors who make less than $50,000 a year won’t pay any income taxes at all...
...Since this is a conservative institution with the highest academic standards, each class will begin with a quiz...
...The problem is the economists could be wrong—this happens on occasion—and Obama could actually mean what he says...
...Speaker number one is then-presidential candidate Franklin Delano Roosevelt, campaigning in 1932...
...The Democratic party’s left wing didn’t like it when Obama named Furman to his team last June...
...He’s proposing a windfall profi ts tax on oil companies...
...It’s not the end of the world...
...They’ll exacerbate the problem...
...Which brings us to: THE BAD There are all sorts of taxes that can be raised, and a President Obama is going to raise almost all of them...
...This is the secondmost disturbing aspect of his economic agenda...
...of Robert Rubin, who has said, in the past, and this is not a joke, kind things about Wal-Mart...
...A no-trade Obama presidency could let the system degrade even further...
...As a wise man once said, the closest thing to immortality in this life is a government program...
...Obama has opposed every trade deal under consideration since he’s been in Congress, which, admittedly, isn’t all that long...
...Obama says that, under his plan, tax rates on incomes below $250,000 will not change, and that “95 percent” of Americans will actually get an income tax cut...
...In each case, events interfered...
...His health care plan, for instance, does not contain an individual mandate...
...Class dismissed.Matthew Continetti is the associate editor of THE WEEKLY STANDARD...
...This isn’t “cutting” taxes, by which one usually means across-the-board, permanent rate cuts...
...He likes taking things step by step...
...They react sourly to brashness and unpredictability...
...If Obama is elected president in a few weeks, not only is enrollment in this class going to spike, but federal taxes, spending, and the defi cit—at least in the short term—are all going to rise...
Vol. 14 • October 2008 • No. 6
