Wednesday, July 31, 2013

Obama's "Grand Bargain"

Obama; Quite At Home At An Auto Union Rally

Yesterday President Obama stopped by an Amazon Distribution center in Kentucky to take credit for the additional 7,000 hiring positions Amazon is establishing, though he had nothing whatever to do with that decision.

That's okay...we're used to that now.  What we're not used to was Obama's speech yesterday.  He used the occasion to propose a "Grand Bargain" with Republicans with corporate tax reform.  This after five years of Republican cajoling Obama to take action to bring America's corporate tax code in line with rates our foreign competitors are paying.   Anxious not to sink further, from lame duck status, to irrelevance, Obama proposed lowering corporate taxes, from 35% to 28%, and a more favorable rate for manufacturers to 25%.  

On the surface, that doesn't sound half bad, although to be truly competitive in the world marketplace, and to prevent more of American industry being swallowed up by foreigners, we need to match the average world corporate rate, which is 15%.  Let's keep in mind folks that our products and services are taxed all the way down the line, and additional taxes are assessed on corporate profits that are distributed to corporate shareholders (yeah, mom and pop), through taxing dividends.  

But, even as I disagree with the rate structure Obama proposes, it would seem to be a nice first step in bringing jobs back to America, and hiring more of those already here by driving world demand for our products and services.  

And wonder of wonders, Obama, for the first time in five years, is acknowledging that corporate tax reform, (lowering them), will ultimately raise additional revenue by freeing up business to hire and outsell our competition.  Not only would we be producing more in America but we would be collecting income taxes from all the new workers hired!

Here's the real problem I have with Obama's proposal; he wants the additional revenue generated from tax reform to be managed by Big Government.  Dear readers; please cite one government activity that efficiently manages our tax dollars.  (I rest my case).  

And, again, I don't have any problem with what Obama wants to spend that additional tax money on!  He cites the need to improve our infrastructure (roads and bridges and build-outs of telecommunications).  Secondly, Obama wants to allocate that money to improve our community colleges.  Again, no problem!

Just don't let Uncle Sam distribute the money!  Remember the $500 million dollars that Obama designated for public construction signs that said "your stimulus money at work?"  In the immortal words of Cheech and Chong "we don't need no stinkin signs...just do the damn work and forego half a billion dollars in "vanity plates!"  

And, with regard to community college enhancements, does anyone recall Senator Colburn's annual "wasteful spending list?".  On that list was Uncle Sam wasting tens of billions of dollars to send high school graduates back to community college so that they could learn to read and write at the high school level!  And guess what?  We forked out billions of dollars in this effort, and lots of students took the money..and ran!  Less than a third completed the program and are still wandering around with 5th grade reading skills!

No!  Not one more cent should be wasted by allowing government to manage this education money!  God knows we need to educate and re-train the work force...but it can be done in a far more efficient manner.  Here's how:

With respect to rebuilding infrastructure, simply allocate the money to individual states, with strict guidelines on how the funds will be spent.  Finish completion of federal and state highways, rebuild damaged bridges and (hell, this ought to make Obama happy), even finish municipal metro lines.

However, with work force training, private enterprise simply must be involved.  Set up a corporate partnership between community colleges and corporate work centers.  Provide corporate tax incentives for any business willing to send seasoned instructors into the colleges to teach logistics management, welding, production engineering and the like.  Don't waste a cent on native American basket weaving and 16the century Russian literature!  Train these people for the jobs currently in demand...businesses all over America are complaining that the current workforce is not trained for the jobs available!

So, Obama has made his speech....and after five years is now admitting that corporate tax reform will drive the economy.  He is doing it, no doubt, with great reluctance, as this does not adhere to his Socialist model.  However, Obama loves his legacy far more than anything else, and he knows that five years of stagnation is not amenable to a great legacy.   

His motivations matter not.  We can all be a little heartened that he has taken one little baby step toward ending five years of 30% real unemployment.  It remains to be seen if this pretty speech is just another political ploy to make the Republicans look bad...or whether he proves to be flexible enough to listen to business and employ what works.

We shall see.

1 comment:

Anonymous said...

Nice corporate tax reduction, while leaving small business rates at 40%, with small business being the largest employers in the country. Brilliant!