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Daily Archives: April 4, 2011


War of choice getting in the way of Obama’s preferred message?

Interesting story from Glenn Thrush at POLITICO. And, of course, it is about pure politics.   It seems that Obama’s decision to go to war with Libya has caused a distraction from the most pressing domestic issue – the economy.  And just when some half-way decent news on unemployment is evident.

But in the view of his closest allies, Libya is drowning out his attempts to portray himself as an economic commander-in-chief fighting a series of new threats to the fragile U.S. recovery, especially the devastating and politically poisonous rise in gas prices.

The most recent example: On Friday, press secretary Jay Carney hoped to spend quality time with the White House press corps discussing an upbeat March employment report showing the economy added 216,000 jobs, outpacing analysts’ estimates.

But he was asked a grand total of two questions about the report. He fielded 16 about Libya and at one point had to sneak in a plug for the positive job numbers when a reporter asked a question about budget negotiations with Congress.

“Don’t tell me Libya is not a distraction,” said Leslie Gelb, president emeritus of the Council on Foreign Relations. “Dealing with a military operation of this complexity, with this many moving parts, takes an enormous amount of the president’s time. We’re talking about hours and hours a day dealing with his national security staff. … It has an impact on everything else.”

Now obviously, it we have to go to war for a good reason – an actual imminent danger or threat to our national security – then you don’t worry about how it will effect the political agenda.  You do your duty as CiC.  In fact, a President can normally expect it to help him politically – to get a pretty good bump in the polls – as the nation comes together behind them.

But when the war is perceived as a “war of choice” or a “dumb war”, such a bump may not be forthcoming – as in the case of the war against Libya:

A new Rasmussen Reports national telephone survey of Likely Voters shows 37% give the president good or excellent ratings on his handling of national security issues. Slightly more voters (40%) say the president is doing a poor job when it comes to national security.

Rasmussen isn’t the only polling service to have those numbers:

Just 39 percent of Americans think Obama has clear goals in Libya, while 50 percent think he doesn’t, according to poll results released Monday by the nonpartisan Pew Research Center.

Just 47 percent of Americans support the U.S. airstrikes, while 36 percent don’t and 17 percent don’t know, according to the Pew poll.

The Gallup Poll found similar results, the lowest level of initial support for a U.S. military action in at least three decades, and the first time in 10 interventions dating to the 1983 invasion of Grenada that a majority of Americans didn’t support the action at the onset.

Translation?   This is a political problem of Obama’s own making.  And on the eve of launching his re-election campaign to boot.  Not smart politics – not smart at all.  He’s literally “created” a story by his decision to wage a war of choice that will dominate the news and any other message he tries to spin.  What is clear is that despite the announced hand-over or pullback in US participation, the press continues to treat it like it should be treated – a war instigated and started by the US (and others) and continuing to have US participation whatever the level.

And we’re starting to hear about how overtaxed our coalition partners are now.  The UK for example,.  Says the head of the RAF:

With the RAF playing an important role in Libya, where bombers, fighter jets and surveillance aircraft have all been involved over the past fortnight, he admitted the service was now stretched to the limit.

[Air Chief Marshal Sir Stephen] Dalton, 57, said the RAF was planning to continue operations over Libya for at least six months. His assumption is that planes will be needed "for a number of months rather than a number of days or weeks".

Did you catch that last sentence?  Months instead of weeks.  So we can expect to see this remain in the news for some time and we can most likely expect to see more and more of the coalition members whining about their level of participation and attempting to get a higher level of US participation.  Already, this weekend, the US flew more sorties in the NFZ than previously planned.

So here you have a classic example of not only a dumb war, but dumb politics.  That’s usually what happens when you make snap-decisions without any planning while apparently completely underestimating the reaction of the American people.

Not that anyone on the left will admit that or anything.

~McQ


Corporate taxes: We’re number 1

As of April 1st, when Japan officially lowered its corporate tax rate, we took over the top spot in the world, as James Pethokoukis points out:

With Japan officially cutting its corporate tax rate as of today, America now has the highest rate among advanced economies. Even its effective tax rate is way above average despite the likes of General Electric spending billions to game the labyrinthine code. A smarter approach would be to substitute a business consumption tax.

Now the United States might cling to second place if Japan cancels the rate reduction to help pay for the tsunami and earthquake devastation. After factoring in state taxes, America’s top rate of 40 percent would still exceed the average of 26 percent for the rest of the OECD.

No, it’s not an April fool’s joke.  We do become the nation which taxes corporate entities the most in the world.   As Pethokoukis also points out, tax rates are like sticker prices on cars – the real tax is significantly lower than that.  But in our case, even with the $40 billion in compliance costs, etc. spent by corporations to lower their tax bill, we still remain the highest corporate tax rate in the world:

Headline rates, of course, are like sticker prices on new cars. The real numbers are lower, thanks in part to the $40 billion companies spend annually to comply with, and often sidestep, the maximum levy. GE, for example, has taken heat for consistently paying less than what the U.S. tax code would imply it should.

But even taking into account the efforts of attorneys and lobbyists, the average effective U.S. rate in 2010 was 29 percent against 21 percent for international counterparts, according to the  American Enterprise Institute. And before the recession, corporate tax revenue as a share of U.S. GDP was at its highest since the 1970s.

“Competitive” is a word politicians like to throw around.  But their tax rate is non-competitive.  It is a factor that weighs heavily on where a business may choose to locate.  Or relocate.  So while we maintain the highest corporate rate in the world, we see politicians mouthing off about punishing corporations that “outsource” jobs.  It is a reaction to a problem government has created and now government talks about punishing those who react rationally to their tax rate?  Amazing.

Secondly, as we’ve said ad nauseum – corporations don’t pay taxes, their customers do.  The corporation, for the most part, simply acts as a means to pass those taxes (incorporated in the price of the good or service produced by the corporation) on to the Federal government.  Any tax rate increase in the corporate world is a tax increase on the customers of that corporation. 

What effect would lowering corporate taxes have?  Pethokoukis lays out the litany:

Politicians of all stripes have been talking about lowering corporate taxes and eliminating loopholes to pay for a sharp rate reduction.  A sharply lower rate —  Canada’s will be just 15 percent in January 2012 — would boost worker wages, investment, productivity, jobs and growth. Such reforms, though a big improvement, would still leave in place a flawed and unwieldy structure.

Like the rest of our tax structure, the corporate tax system is in bad need of reform.  And yes, it’s just another problem among a galaxy of problems that most likely won’t be adequately addressed.  That’s not to say some aren’t trying.  Pethokoukis points out an alternative that will, apparently, be introduced by Rep. Paul Ryan in the GOP’s budget plan for next year:

A better alternative might be a consumption tax where business would simply determine its liability by subtracting total purchases from total sales. The tax would then be imposed on what’s left, essentially a firm’s value added. Unlike the corporate income tax, a consumption tax would allow the cost of investments to be fully deducted immediately, providing incentives for more. Such a tax also could be imposed on imports and deducted from exports, as other nations currently do with their VATs.

The Tax Policy Center estimates an 8.5 percent consumption tax — by broadening the tax base and boosting output – would boost corporate tax collections as a percentage of GDP to 4.5 percent from the 2.4 percent the White House forecasts for the next few years. (This is the corporate tax plan, by the way, found in Rep. Paul Ryan’s “Roadmap for America’s Future.”)

If we have to have a tax, this seems eminently more workable and less onerous while not killing competitiveness or having corporations seeking other places to locate.  And the obvious bonus is  it boosts revenue for the Fed – used hopefully to pay down debt, not enact some pie-in-the-sky new entitlement we can’t afford.

~McQ

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