James Pethokoukis

Politics and policy from inside Washington

Obama tells business to share the wealth

Feb 8, 2011 03:38 UTC

A few thoughts on President Obama’s speech to the U.S. Chamber of Commerce:

1. Would it be too much trouble for him to be more specific about how deeply he wants to cut corporate tax rates? I hope he doesn’t see the OECD average of 25 percent as a floor. Canada’s rate will be dropped to just 15 percent next year. And if he really wants more of company profits to be “shared” with workers, then he ought to propose abolishing corporate taxes altogether since 70 percent of the tax burden is passed along to workers.

2. Would it be too much trouble for him to be a bit more specific about what regulations he wants to cut? The Heritage Foundation has 20 great ones for his consideration. The think tank also has this helpful piece of advice:

Rather than require agencies to identify harmful regulations during the next 120 days, or even to eliminate unwarranted rules, the order [on reviewing federal regulations] merely requires agencies to submit a “preliminary plan” for reviewing regulations sometime in the future, with the goal of making their regulatory program either less burdensome or “more effective.” And despite promises of transparency elsewhere in the order, the results of any regulatory reviews conducted are required to be released online only “whenever possible.”

3. Not surprising that the execs in attendance clapped when Obama talked about “investing” in America. That partly means transferring taxpayer money to Big Business.  And that stuff about a new social contract between government and business? Time for a Milton Friedman break:

But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”


If it wasn’t apparent before the 08 elections, it should be painfully clear now that Pres. Obama views business as something that should be tolerated and controlled. He does not believe ENOUGH in the free-market system to let it work. Our economy has been resilient in the past, but Mr. Obama has created incredible uncertainty among businesspeople. He PERSONALLY is probably the number-one factor holding back business investment and hiring. Businesspeople are “people” and they rely not just on financial analyses and market studies to make decisions. They also use their intuition. Intuitively I do not have confidence in Mr. Obama that he will do right by business and he never really does anything to change that feeling. Above all, he is a master (or at least he THINKS he’s a master) at careful selection of words so that an inattentive listener will believe he is making concessions or changing his tune. In reality, he’s the same semi-socialist whom some of you elected. In that (and other) regards, I greatly prefer Mr. Bush.

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When states go bust

Feb 7, 2011 16:54 UTC

That is the headline for my piece in the latest Weekly Standard about letting US states declare bankruptcy. Here’s a taste:

It’s a solution of apparent Alexandrian elegance and simplicity: Empower America’s cash-strapped states to slice cleanly through a strangling knot of debilitating debt and government union cronyism by letting them file for bankruptcy. Long-term liabilities could be restructured, unaffordable labor contracts rewritten, fiscal health restored. No federal bailouts necessary. … Kevin Drum of Mother Jones put it this way: State bankruptcy “promises to become a pretty serious battle. For Republicans it’s got everything: The tea parties will love it, it provides an alternative to raising taxes, and .  .  . it helps defund a key Democratic interest group. What’s not to like?”

Surprisingly, quite a bit—at least among some Republicans and conservatives. In a January 24 session with reporters, House majority leader Eric Cantor brushed off the idea. … A more pointed critique was offered by members of the highly respected free-market Manhattan Institute, Nicole Gelinas and E. J. McMahon, in the op-ed pages of the Wall Street Journal and other papers. Among their many objections to state bankruptcy: It would violate the constitutions of many states; it would damage the balance sheets of banks holding a quarter of a trillion dollars in state and municipal bonds; it might even cause such investor panic as to risk repeating the 2008 financial meltdown. “Bond-market brinkmanship and bankruptcy threats can’t save the states from themselves,” Gelinas wrote in the Boston Globe on January 23.


The states do not need bankruptcy. They can simply default. They can outlaw public sector unions and freeze their pension liabilities. And if they modify their constitutions and their laws the states creditors will have no recourse.

As long as this is done in a roughly even handed way the creditors would not be able to challenge these actions in federal courts.

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Obama’s big shift?

Feb 7, 2011 15:53 UTC

The president told Fox’s Bill O’Reilly that he hasn’t shifted to the center. “I’m the same guy,” Obama says.  Right, he’s the same guy — a guy who will try and push through as much of his left-of-center agenda as he can.  If he had the votes,  for instance,  Obama would certainly be pushing a cap-and-trade energy plan or higher income taxes. But he doesn’t, so it’s time for Plan B.

And at the heart of that plan is winning reelection, a goal Obama apparently believes will be much easier if America’s CEOs aren’t railing against him. Conflicts with Corporate America cuts against the post-partisan mantle is his trying to reclaim.Thus his speech today to some 200 executives at the US Chamber of Commerce.  But here is the thing:

1) Obama should try and make these folks, at least some of them, angry by taking away tax breaks and subsidies in exchange for a lower corporate tax rate.

2) Fundamentally, Obama is skeptical  of markets which is why his way of embracing the private sector is via a grand, corporatist partnership with Big Business who will rent seek with the best of them. Established giants don’t want new competitors. They don’t want a constantly churning, entrepreneurial economy. The status quo is just fine for them, especially regulations that help preserve their advantage. Innovation can be a threat.

3)  When Obama decides to rely on markets rather than government for allocating healthcare resources, then I will acknowledge a shift to the center.


This from the author who thinks Reagan was a conservative. Obama has cut taxes for billioniares, signed a stimulus bill that was over 30% tax cuts, increased defense spending, expanded the War on Terror, surged in Afghanistan, signed a Republican health care bill, made the Too Big to Fail banks whole, proposed off-shore oil drilling, proposed cutting entitlements, frozen government pay, and just hired the CEO of General Electric and a Chief of Staff from JP Morgan Chase. You think he’s “left of center”? Well, perhaps. You think Paul Ryan is moderate.

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