Obamanomics, leaving on a jet plane
Buckle your seat belts low and tight, America, there’s going to be turbulence all the way to Election Day, 2012. It’s only the summer of 2011 and already we have kids vs. corporate jets, courtesy of the White House political machine.
The most newsworthy bit of President Obama’s press conference certainly had nothing to do with economics or America’s precarious fiscal position. Recall: The president’s most recent budget plan would add $9.5 trillion in cumulative new debt over the next decade. Eliminating a tax break for the purchase of corporate jets – it’s called “accelerated depreciation” and Obama has endorsed the deduction twice before to boost growth and create jobs – would save $3 billion, or 0.03 percent of that total.
Yet this is the place where the president has chosen to stand his ground, to say “Here and no further!” Obama astride the bridge Khazad Dûm. He challenged the GOP to “go talk to your constituents, the Republican constituents, and ask them, are they willing to compromise their kids’ safety so that some corporate-jet owner continues to get a tax break.”
Really? Would the food safety system – or National Weather Service or National Institutes of Health – would suffer if government extracts a few hundred million less a year from taxpayers? Is Uncle Sam really running such a lean-and-mean operation? Of course not. McKinsey consultants have found that if the U.S. public sector could just halve the productivity gap with the private sector, its productivity would be as much as 15 percent higher and would generate annual savings of up to $300 billion a year. If the president wants to get rid of corporate tax breaks, he should offset them by lowering the sky-high U.S. corporate tax rate while also cutting spending.
But the clumsy attempt at class warfare probably wasn’t even Obama’s most disheartening moment during the presser. Several others were at least equally as bad:
1) The president unnecessarily raised the specter of default if the debt ceiling is not raised by early August:
By August 2nd, we run out of tools to make sure that all our bills are paid. So that is a hard deadline. And I want everybody to understand that this is a jobs issue. This is not an abstraction. If the United States government, for the first time, cannot pay its bills, if it defaults, then the consequences for the U.S. economy will be significant and unpredictable. And that is not a good thing.
Yet as the Bipartisan Policy Center noted in a new report, the federal government will take in some $170 billion in August while debt payments only equal $29 billion. Actually, that’s enough revenue to cover debt payments, entitlement (Social Security, Medicare, Medicaid) payments, unemployment benefits and payments to active-duty military with billions left over. It might be messy and chaotic, but that is not the same as default.
2) The president perpetuated this myth: “You can’t reduce the deficit to the levels that it needs to be reduced without having some revenue in the mix. “ Yet Rep. Paul Ryan’ s Path to Prosperity does just that, even while assuming — to satisfy the Congressional Budget Office — the economy grows at a snail-like 2 percent pace year after year for decades. If we need more money, grow the economy faster.
3) Maybe the biggest economic issue of the year, other than the anemic recovery, is the National Labor Relations Board attack on Boeing and its decision to open an aircraft assembly line in right-to-work South Carolina. This de facto attempt to impose wage controls on one of America’s largest exporters by limiting where it can do business is a dagger aimed at the heart of the American free enterprise system. But here, sadly, is the president again leading from behind:
Essentially, the NLRB made a finding that Boeing had not followed the law in making a decision to move a plant. And it’s an independent agency. It’s going before a judge. So I don’t want to get into the details of the case. I don’t know all the facts. That’s going to be up to a judge to decide.
Who knows, maybe the president just has something against jet airplanes, akin to his apparent dislike of those job-killing ATMs. But this seems certain: Obamanomics took flight in 2009 as a purist Keynesian experiment in economic management from high above. The ultimate Dreamliner for Democrats. Now, two-and-a-half-year later, it’s begun its sputtering descent.