James Pethokoukis

Politics and policy from inside Washington

Obama’s vague Buffett Rule a political ploy

Sep 19, 2011 15:45 UTC

A few thoughts on the economics and politics of President Obama’s tax-the-rich “Buffett Rule” and new debt reduction “plan”:

1) What problem does the Buffett Rule address (assuming it is something more than just a campaign talking point or vague guideline)? Rising inequality? Inequality has been rising globally for years due to globalization and technology. Higher taxes on the rich won’t help that. The biggest economic problem America faces right now is slow economic growth.

2) Would the Buffett Rule reduce the budget deficit at all? That’s far from clear. Higher taxes on small business and entrepreneurs would slow growth and reduce tax revenue. It would also encourage greater efforts at tax avoidance. The 1993 Clinton tax hikes, for instance, only generated a third of the revenue that CBO forecasted. And those increases were instituted when the economy was growing at a steady 3% clip, not stuck in slow-growth mode like the U.S. economy currently is. From Obama’s speech, the it seems to me that the Buffett Rule is probably a special capital gains tax rate of 28 percent for people making $1 million a year.

3) Obama still declines to release a long-term, multi-decade debt reduction plan of the sort Rep. Paul Ryan has put together. I think the reason is clear: If Obama were to do that, it would be crystal clear to voters that the only way Obamacrats can pay for permanently higher levels of government spending is through permanently higher levels of tax revenue, including higher taxes on the middle class. As I wrote a couple of months back:

Three liberal think tanks recently devised budgets to put the U.S. government on a sustainable fiscal path through 2035. Their plans, collectively, called for Washington to collect an average of 23.6 percent of GDP vs. the post-World War II average of 18.5 percent. To put that in further perspective, the highest level of tax revenue that Uncle Sam has ever taken is 20.9 percent in 1944.

And to reach such a stratospheric level of taxation, these groups are calling for unprecedented tax hikes via millionaire surtaxes, higher taxes on alcohol and tobacco, securities transaction taxes, higher taxes on capital gains, higher taxes on corporations, higher death taxes, carbon taxes, and gasoline taxes. None of which, supposedly, would hurt economic growth. Even worse, all those tax hikes would still fail to balance the budget. And when you move past 2035, taxes would almost certainly need to go even higher.

4) OK, the top 1% of US taxpayers make 20% of income and pay 40% of taxes. Isn’t the tax code already “progressive?”

5) The Solyndra scandal revealed Obamanomics to be mostly a clever, crony-capitalist scheme to launder taxpayer money through favored special interests and then back into Democrat campaign coffers. This new budget and tax plan reveals the other: a plan to redistribute rather than create wealth.

 

COMMENT

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Solyndra, the logical endpoint of Obamanomics

Sep 16, 2011 15:38 UTC

The bankruptcy of solar-panel maker Solyndra neatly encapsulates the economic, political and intellectual bankruptcy of Barack Obama’s Big Idea. It was the president’s intention back in 2009 to begin centrally reorganizing the U.S. economy around the supposed climate-change crisis.

To what end? Well, Obama claimed his election would mark “the moment when the rise of the oceans began to slow and our planet began to heal.” But that was just the cover story. At its core, Obamanomics is about the top-down redistribution of wealth and income. Government spending on various “green” subsidies and programs, along with a cap-and-trade system to limit carbon emissions, would enrich key Democrat constituencies: lawyers, public sector unions, academia and non-profits.

Oh, and Wall Street, too. Who was the exclusive financial adviser to Solyndra when it was trying to secure the $535 million loan from Washington? Goldman Sachs. And had the cap-and-trade scheme been enacted, big banks stood ready to reap billions from the trading of carbon emission credits.

No wonder many Democratic strategists predicted their party’s 2008 landslide win would usher in a generation of political dominance. Obamanomics, essentially, would divert taxpayer dollars to the Green Lobby – and then into the campaign coffers of the Democratic Party. This is what crony capitalism is really all about: politicians enriching favored businesses, who then return the favor. Or maybe it’s the other way around, Who cares, really. It’s an endless, profitable loop for both.

And Obama almost pulled it off. The Great Recession conveniently allowed the president to start the spendathon under the guise of economic stimulus. (“You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” – White House Chief of Staff Rahm Emanuel, 2009). As it turns out, the $38.6 billion loan program for clean energy firms that Solyndra benefited from has created just 3,545 permanent new jobs after parceling out half its dough. That works out to around $5 million a job.

Unfortunately for the Obamacrats, the financial meltdown also undercut political support for cap-and-trade on Capitol Hill. Voters worried the scheme would slow growth and cost jobs. But without permanently and continually raising the price of carbon-based fuels, many green businesses can’t make the numbers work.

As Peter Lynch, a New York-based solar energy analyst, told ABC News:

It’s very difficult to perceive a company with a model that says, well, I can build something for six dollars and sell it for three dollars. Those numbers don’t generally work. You don’t want to lose three dollars for every unit you make.

Unless, of course, American taxpayers make up the difference — though in the case of Solyndra, even government’s thumb on the scale wasn’t enough to save it. And it often isn’t enough when an investment’s goals are a fat political reward rather than a financial one. Indeed, studies of similar government investment efforts around the world show they’re usually a bad deal for taxpayers. An analysis of Canada’s government-backed venture capital fund, for instance, found the recipient firms “underperform on a variety of criteria, including value-creation, as measured by the likelihood and size of IPOs and M&As, and innovation, as measured by patents.”

Even after getting the loan, Solyndra spent $187,000 on lobbying efforts, according to Bloomberg, including trying to get the White House to push government agencies to install its panels on the rooftops of federal buildings and  extend “buy American” rules that favor U.S. companies. Instead of revenue seeking, Solyndra was “rent seeking,” which means trying to make money by manipulating government .

And when the White House was trying to determine whether to sink another $67 million into Solyndra, its calculus was political not financial (via The Washington Post):

“The optics of a Solyndra default will be bad,” the Office of Management and Budget staff member wrote Jan. 31 in an e-mail to a co-worker. “If Solyndra defaults down the road, the optics will be arguably worse later than they would be today. . . . In addition, the timing will likely coincide with the 2012 campaign season heating up.”

That’s not how the private sector makes investment decision. But it’s routine for government where the stakeholders are politicians, bureaucrats, lobbyists and favored constituencies. The takers, not the makers. That’s whose side Obamanomics is on.

COMMENT

The tragedy of the Commons was the control and regulation of what was a prior “free market resource that the townspeople used under free association agreements. Today, the Federal Corporation of the United States of America seeks to dominate all resources, natural and economic, and dictate all commerce with the help of the complicitous, who justify it in the name of saving the earth. A planned economy will not make the best use of limited natural resources, because it wastes them. Tyranny has no justification, especially for something as ill conceived as Chicken Little’s “climate change.” Carbon Dioxide guilt is the hobgoblin of little minds in light of the CO¬2 just belching out from volcanoes across the world. “Green energy” needs funding only by people who believe in it and want to risk their own money. For this lame “investment” excuse, this administration has squandered taxpayers’ funds, especially when it has been proven to be the crony capitalists in the Democratic Party squandering tax money for their personal and their party’s exclusive benefit. Also, conservatives don’t endorse profligacy lest they become known as liberals.

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Why Obama’s school rehab plan may flop

Sep 14, 2011 18:05 UTC

The point of President Barack Obama’s American Jobs Act is, well, to create jobs. And the sooner the better, right? Unemployment is above 9 percent, and everyone from Wall Street to the Congressional Budget Office to the White House now thinks that number isn’t going to improve anytime soon. Thus Obama’s new $450 billion stimulus plan. But since this new proposal is structured just like 2009′s $800 billion American Recovery and Reinvestment Act, it should be no surprise that it contains many of the same flaws as Stimulus 1.0.

Example: Yesterday, Obama traveled to Fort Hayes High School in Columbus, Ohio to promote his plan, particularly the bit about spending $25 billion to refurbish 35,000 American schools. Here is some color from The Columbus Dispatch:

Obama toured Fort Hayes Arts and Academic High School, a campus of Columbus City Schools buildings, some of which date back to the Civil War era and have undergone significant upgrades. The president’s jobs plan calls for the $25 billion to modernize 35,000 schools nationwide. Ohio could get up to $985.5 million, with up to $111.6 million for Columbus City Schools. ”I wouldn’t mind taking a few classes here,” said Obama, who used Fort Hayes as an example of upgrades and jobs created to complete those upgrades that could take place throughout the U.S. If his bill is passed. ”The renovation of Fort Hayes is a great example of where those jobs can come from if we can finally get our act together in Washington,” Obama said.

But what Fort Hayes High School really exemplifies is how long it will take for this new round of government spending to show any employment results. Some $55 million in renovations on the campus began in March 2003, starting with design work, and were originally scheduled to be completed by March of 2007. Different projects started at different times, with each scheduled to take about three years to complete. Heck, it takes months just to do the necessary architectural planning. In short, there will be nothing “shovel ready” about these education infrastructure projects. If we want to upgrade U.S. schools, fine. But the effort will make for a poor 2012 jobs plan.

And, of course, there are always concerns about how efficiently this money would be spent. In 2010, Los Angeles opened its new Robert F. Kennedy High School, costing $578 million. Here’s how ABC News described it:

The new campus between Wilshire Boulevard and 8th Street in Los Angeles preserve pieces of the historic hotel, but it’s the stunning new architecture that’s drawing eyes and plenty of wagging fingers.

The soaring, unusually shaped buildings are clad in glass and metal, and the interiors are just as slick. The facility boasts a state-of-the-art swimming pool, fine art murals, an ornate auditorium suitable for hosting the Oscars, and a faculty dining room that the superintendent says is “better than most restaurants.”

All those amenities add up to an enormous price tag, which works out to about $250,000 per pupil. That $578 million cost is more expensive than the Bird’s Nest stadium built for the 2008 Olympic Games in Beijing, China, which cost $500 million. It’s also significantly more expensive than the $400 million home of the Denver Broncos, Invesco Field at Mile High.

So a) all this new spending would not create many jobs anytime soon — even if you buy its Keynesian rationale — and b) the rush to spend money may result in plenty of waste just as with the LA high school and the loan guarantees to solar-panel maker Solyndra.

COMMENT

To fight against unemployment/joblessness, a country, in the modern age of our time does not need spending here and there including schools etc., rather private sectors concerning to industries and agricultural farming need to be encouraged to establish more and more of them and thus adequate number of jobs would be created in those newly formed projects and the economy of the country would be enhanced.

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Obama’s $447 billion reelection plan

Sep 9, 2011 15:16 UTC

There’s been much speculation that President Barack Obama will spend $1 billion to get reelected. Turns out those guesses were off by $446 billion.

What Americans heard last night was a $447 billion political plan, not an economic one. It’s purpose was to a) fire up the demoralized Democratic base and b) show independents that Obama is trying to do something – anything – to reduce unemployment, not just slash needed “investment” like those heartless, pro-austerity Republicans.

Now all the usual suspects will claim the American Jobs Act will create more growth and more jobs through $250 billion in temporary payroll tax cuts and $200 billion in infrastructure spending, unemployment benefits and aid to state and local government.

Take Moody’s economist Mark Zandi, a favorite of the White House and congressional Democrats. Zandi’s research says the original $800 billion Obama stimulus created or saved some 2-3 million jobs. And he likes Stimulus 2.0 just as much. He claims it would “add two percentage points to GDP growth next year, add 1.9 million jobs, and cut the unemployment rate by a percentage point.”

Really? Seriously?

1) Of course, such analysis is based on garbage in, garbage out, Keynesian economic models. The results were already baked into the cake.  Better to see what actually happened as gleaned from government statistics. In a recent paper, Stanford University economist John Taylor simply looked at whether, as a result of the 2009 American Recovery and Reinvestment Act, consumers actually consumed and whether government actually spent in a way that produced real growth and jobs. Turns out, they didn’t:

Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers. Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.

2) Economists from George Mason University also looked at the real-world results of  the ARRA by surveying employers. Their findings:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired. More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.

3) And let’s not forget what Milton Friedman might have to say about this sort of deal, which gets to the heart of why Keynesian stimulus doesn’t work (via Wikipedia):

The permanent income hypothesis (PIH) is a theory of consumption that was developed by the American economist Milton Friedman. In its simplest form, the hypothesis states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. The key conclusion of this theory is that transitory, short-term changes in income have little effect on consumer spending behavior.

Team Obama thinks the whole package could boost growth by two percentage points. But the  infrastructure spending and unemployment benefits will be a tougher sell. Republicans may well substitute their own stimulus ideas for those items so that the package ends up composed entirely of tax cuts.

The most likely addition is a temporary reduction in the taxes on foreign earnings brought back to the U.S. by its multinational corporations. The U.S. Chamber of Commerce estimates such a tax holiday could boost growth by a full percentage point next year. White House economists criticize idea as providing too little bang for the buck, but it could be the price for getting a deal. But an agreement can get probably get done, which would enhance perception of Obama as a leader and boost his approval ratings. Just don’t expect it to do much for America’s sputtering economic recovery.

COMMENT

James, didn’t your mama teach you “if it sounds too good to be true it probably is”–like the previous post–had your removed your “liberal magical spectacles” to take a closer look at this fraud you would have seen him for what he is–a complete non starter. Come to the dark side James and see the light.

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Dr. Obama prescribes another big dose of stimulus

Sep 9, 2011 07:36 UTC

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By James Pethokoukis

WASHINGTON (Reuters Breakingviews) – U.S. President Barack Obama’s $447 billion jobs plan should please everyone from Federal Reserve Chairman Ben Bernanke to the International Monetary Fund’s boss Christine Lagarde. Both policymakers have suggested America put stimulus ahead of austerity. Congressional Republicans may be less thrilled. But the tax cuts may pass Congress. Expect Wall Street to start boosting 2012 U.S. growth forecasts.

All summer, bank economists have been slashing their GDP estimates for next year. Yet at the same time many have continued to assume that more than $100 billion in temporary payroll tax cuts for workers would be extended through 2012. The new White House proposal raises that total to $175 billion and also tacks on a $65 billion payroll tax reduction for employers. Those two elements make up the bulk of Obama’s “American Jobs Act” and are the bits mostly likely to earn GOP support on Capitol Hill.

The president’s models calculate the whole package could boost growth by two percentage points. Some $200 billion in infrastructure spending and unemployment benefits will be a tougher sell. Republicans may well substitute their own stimulus ideas for those items so that the package ends up composed entirely of tax cuts.

The most likely addition is a temporary reduction in the taxes on foreign earnings repatriated by multinational corporations. The U.S. Chamber of Commerce estimates such a tax holiday could boost growth by a full percentage point next year. White House economists criticize the idea as providing too little bang for the buck, but it could be the price for getting a deal. Either way, an agreement can get done.

Then it will up to the new debt reduction “supercommittee” in Congress to figure out a way of paying for a year of stimulus over the next decade. The panel was already going to have a tough time finding $1.2 trillion in deficit cuts, its current mandate. Obama would increase the bipartisan group’s burden by more than a third.

But with borrowing costs for Uncle Sam incredibly low, markets seem unconcerned about federal debt levels. And with re-election perhaps riding on getting the plan passed, Obama probably isn’t too worried either.

CONTEXT NEWS

— U.S. President Barack Obama challenged Congress on Sept. 8 to enact a $447 billion package of tax cuts and new spending to revive a stalled job market. But he faces an uphill fight with Congressional Republicans on any new spending.

— Obama, who pushed through an $800 billion economic stimulus package in 2009, said his new plan would cut taxes for workers and businesses and put more construction workers and teachers on the job through infrastructure projects.

— As fears rise of another recession and more global economic gloom, G7 finance ministers meeting in France on Friday are set to encourage countries that can afford it to do more for growth.

— Obama said his proposed plan would “provide a jolt to an economy that has stalled and give companies confidence that if they invest and hire there will be customers.”

— He proposed extending unemployment insurance at a cost of $49 billion, modernizing schools for $30 billion and investing in transportation infrastructure projects for $50 billion.

— But the bulk of his proposal was made up of $240 billion in tax relief by cutting payroll taxes for employees in half next year and trimming employer payroll taxes as well.

— Obama also said he was seeking to broaden U.S. homeowners’ access to mortgage refinancing to help the ailing housing market — a proposal that drew rare applause from Republicans during the speech.

(Editing by Rob Cox and David Evans)

The infamous White House jobs chart

Sep 8, 2011 18:37 UTC

Using a handy graphic found in Mitt Romney’s economic plan, I’ve updated the Bernstein-Romer jobs chart from 2009 while also incorporating (in green) Wall Street bank forecasts (Goldman Sachs, JPMorgan) of where the unemployment rate might be headed.

Two things jump out at me: First, of course, is the incredible underperformance of the $800 billion stimulus. Second, note where the Obama White House thought the unemployment rate would be in 2012  even if no stimulus: around 6 percent or so. Reminds me of how dismissive Obama’s economic advisers were in 2009 and 2010 of the thesis that downturns after financial crises can be nasty beasts. Maybe if they had taken the situation more seriously, they would have focused more on growth and jobs (and deep, permanent tax cuts) instead of healthcare and cap-and-trade.

 

COMMENT

Focus on cap and trade? The bill was pulled, there was no focus on it. Focus on health care? Vital to save the economy (15 – 20% inflation in health care costs

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Romney economic plan: necessary but not sufficient

Sep 7, 2011 20:16 UTC

There’s not much I actually dislike about Mitt Romney’s economic plan. I’m even OK with most of the aggressive China trade policy stuff (though probably not the “retaliation if not revaluation” stuff on the currency).

Maybe my biggest problem with what’s in there is that Romney would leave a 10 percentage-point gap between the top marginal income tax rate and the top corporate tax rate, 35 percent to 25 percent.

It’s what’s not in the Romney plan that I have a real problem with. As I read through the 160-page proposal, here are the questions that popped into my noggin:

1. Why not lower the top income tax rate to 25 percent and also clear out many of the tax preferences/breaks/loopholes? Why just hint at broader tax reform? Why not a flat consumption tax?

2. Why not provide a McKinsey-style breakdown on how Romney would achieve four percent annual GDP growth? Adviser Glenn Hubbard comes so close in the foreword that I am pretty certain he’s read this McKinsey report.

3. Why not eliminate all investment taxes along the lines of a tax reform plan outlined by Hubbard in his recent book, “Seeds of Destruction“?

4. OK, Romney would repeal Obama’s healthcare and financial reform plans. Me, too. But what would he replace them with? Again, Hubbard recently wrote a great book on healthcare.

5. And does Romney really think the big problem with Dodd-Frank is that it’s too tough on the banks? Funding statistics should Too Big To Fail still exists. In event of another financial crisis, how would he handle mass insolvency?

6. Nothing about housing. Really? Really?

7. If Romney doesn’t want to go the full Ryan on entitlement, how about at least Ryan-Rivlin?

I guess my core point is that conservative wonks — including his own campaign economists — have been generating loads of interesting tax, entitlement, banking and housing reform ideas over the past few years. But little if any of that stuff is reflected in Romney’s economic plan. Maybe Romney still feels burned by listening to the Heritage Foundation and its support of an individual health insurance mandate.

America faces big short-term and long-term problems. Romney’s economic plan would start to deal with them. Hopefully there will be more to come. But maybe there won’t be. Maybe Romney is following the Chris Christie election model. Make the incumbent the issue and don’t show much of your hand until in office. But I don’t see how that approach creates momentum for substantive change.

COMMENT

James, this was a jobs plan. You wanted more, perhaps tax policy, spending policy, foreign policy, energy policy,domestic policy, etc? Are you this piggish with all the candidates or just Romney?

Perry you got nothing, Huntman you got slightly more. Bachman, nothing. Cain you got talking points. Why the double standard?

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Obama’s 2012 hopes may rest on jobs plans

Sep 6, 2011 16:35 UTC

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

By James Pethokoukis

WASHINGTON (Reuters Breakingviews) – The guy sitting in the Oval Office wins re-election some 70 percent of the time. But a weak economy can even the odds. U.S. President Barack Obama is preparing a big speech on job creation for Thursday in the hope of regaining the initiative. As things stand now, though, by some economic forecasts he may be a slight underdog for a second term. Still, Republicans need an acceptable candidate and a positive message to take advantage in next year’s election.

Slowing GDP growth, still-high unemployment and a see-saw stock market have taken their toll on America’s mood and Obama’s popularity. Consumers are nearly as gloomy as they were in 1980, according to a Thomson Reuters/University of Michigan survey. Back then, President Jimmy Carter said the nation was plagued by a “crisis of confidence” — an event later mocked as his “malaise” speech. And Gallup polls show Obama’s approval ratings at the lowest levels of his term, and the president neck-and-neck with four leading Republican candidates.

But polls more than a year before an election aren’t reliably predictive. Incumbents Bill Clinton and Carter were essentially tied with their leading opponents 15 months before elections in 1996 and 1980, respectively. Come the actual November elections in those years, Clinton won by a landslide and Carter lost by one.

The economy’s trajectory is a big factor. In 1996, GDP grew at a 4.5 percent annual pace during the first nine months of the year. In 1980, it shrank at a 2.4 percent rate. Wall Street doesn’t expect either extreme in 2012 — the consensus is closer to muddling along. JPMorgan, for instance, forecasts unemployment around 9.5 percent and GDP growth of 1.3 percent. Plug that scenario into a well-known election model from Yale University, and the result is Obama losing to his Republican opponent by four percentage points. Plug in a recession and Obama loses in a rout like Carter.

That suggests a double-dip downturn might mean the identity of the Republican nominee wouldn’t matter much. But anything less gloomy, especially if Obama can generate a more positive tone for his own campaign, and a GOP candidate hoping to win the White House and then govern successfully will need a persuasive message. For some hopefuls, that may require moderating their words and policies. But for any candidate, if higher taxes and spending cuts are in America’s future — as they probably must be — the next 15 months will require education as well as electioneering.

CONTEXT NEWS

— Pollster Gallup finds President Barack Obama with approval ratings hovering near 40 percent in its most recent weekly survey. The firm also said on Aug. 22 that the president is “closely matched” with the four leading Republican candidates for 2012 — Mitt Romney, Rick Perry, Ron Paul and Michele Bachmann. Romney edged out Obama among registered voters in the findings, while Obama was ahead of Bachmann.

— U.S. consumer sentiment sank in August as consumers lost confidence in lawmakers’ ability to stave off the threat of another recession, a survey released on Friday showed. The Thomson Reuters/University of Michigan’s consumer sentiment index edged up from its mid-August level but was still consistent with recession-era lows. The index has only been lower in three other surveys, which were taken in April and May 1980 and November 2008. The final August reading on the overall index of consumer sentiment was at 55.7, down from 63.7 the month before. It was slightly better than August’s preliminary reading of 54.9, which had been the lowest level since May 1980.

— Yale University election forecasting model: link.reuters.com/byd43s

(Editing by Richard Beales and Martin Langfield)

Romney’s “green” economic advisers

Sep 6, 2011 16:10 UTC

Later today Mitt Romney will unveil his 59-point economic plan. From what I read in Romney’s preview op-ed in USA Today, it looks a lot like his 2008 plan. For instance, it has an investment tax cut for the middle class just like the one offered three years ago. And Romney wants to cut corporate taxes. Last time he wanted to lower the rate to 20 percent. We’ll see this time around. One area where he could really separate himself is housing. Economic adviser Glenn Hubbard has a housing plan that would allow underwater homeowners to refinance at today’s superlow interest rates.  (In a recent chat, I talked to Hubbard about his views on economic policy: TARP, taxes, trade.)

And earlier today, Romney announced both Hubbard and Greg Mankiw of Harvard as his economic advisers. Interesting to see if his GOP opponents point out that Hubbard has supported cap-and-trade in the past, while Mankiw favors a carbon tax to limit greenhouse gases. As for their boss, here is what I recently wrote about his climate change position:

Romney is clearly in favor of limiting carbon emissions — at least in theory — but does not want to cripple the U.S. economy or spend trillions of dollars for “extreme and expensive measures” like cap-and-trade to do it. He mentions the work of Danish economist Bjorn Lomborg who believes “addressing the remediation of the effects of global warming [is] far more economic and far more humane than massive spending to reduce emissions.”

Romney also spends considerable time in his book explaining the pros and cons of a carbon tax-payroll tax swap, a plan favored by economist and Romney adviser Greg Mankiw and many other Republican-leaning economists. Among the positives, he says:  1) revenue neutrality; 2) higher energy prices would encourage energy efficiency; 3) industry would have a predictable outlook for energy costs; 4) profit incentives rather than government  subsidies would encourage the development of “oil substitutes and carbon-reducing technologies.”

 

My chat with Jon Huntsman about his economic plan

Sep 1, 2011 01:45 UTC

I spoke with Republican presidential candidate Jon Huntsman on Tuesday evening, just as he was putting the finishing touches on his economic plan, which he announced Wednesday. (Here are all the details.) Some excerpts from our conversation:

On what’s wrong with the U.S. economy …

We have a jobs crisis on our hands in this country, and first and foremost we need to rebuild our core. And the core that I’m talking about is our economy. This world always needs an engine of growth to pull the global economy along, and China has been an engine of growth. And the next two or three years could prove problematic in terms of China maintaining its status as an engine of growth.

So all the more we’ve got to get back on our feet and get our act together. What we’re doing is based on common sense; it’s based on experience; it’s based on real-world solutions. There is no lack of solutions, just a lack of serious leadership. I draw my inspiration from basically three things. One of them is the Ryan plan. The second  is the Simpson-Bowles deficit commission report. And the third is energy independence from the Pickens Plan.

On Rep. Paul Ryan’s debt reduction plan …

I embrace the Ryan plan. The content there is basically going to drive me forward in terms of debt and spending and how we get this country to 19 percent of GDP in spending as opposed to 23 percent. That is the model I would work from. It might not be the final position, but it is the going-in position for me. I like what it advocates for Medicaid. I like what it talks about in terms of Medicare.

On tax reform …

In order to infuse predictability and certainty into the marketplace – which it doesn’t have today and therefore it has no confidence and therefore you don’t have business employing and you don’t have business releasing capital expenditures into the marketplace — you have to get certainty in terms of tax reform. We’re going to lower rates [23 percent, 14 percent, 8 percent and a zero capital gains rate] with three brackets and an income tax return that would resemble a post card. This is reminiscent of what I did as governor where I actually created something close to a flat tax where we worked to eliminate all the deductions and loopholes.

So I am premising both individual and corporate tax reform [with a top rate lowered to 24 percent] on clearing the cobwebs out. You pay for it by eliminating corporate welfare, by phasing out subsidies and loopholes and deductions. My goal would be to phase out everything on the corporate side and the individual side. I know that is controversial. I know there is a political risk there. But that is the only way you can raise the revenue to buy down the rates. There ‘s no other way to pay for it. When I was governor it took us two years, we brought both parties together and we got it done. So I am coming at this exercise as probably the only person in the race who’s actually been through this effort before.

On regulatory reform  …

We are going to call for rolling back existing regulations, specifically Obamacare and Dodd-Frank. We are going to call for dramatically reigning in the EPA. We are going to curb the excesses of independent agencies like the [National Labor Relations Board], which is standing in the way of legitimate job creation in South Carolina with the Boeing plant.

On housing:

If you want an example of a housing market that is on the move, why is it that Vancouver the hottest housing market in the world today? Because they have a clear and defined and user-friendly legal immigration policy. They’ve got people coming in and investing in their marketplace, bringing up values. We need to fix our H-1B visa program, as well.

On China and free trade:

We’ve got to use the tools that we’ve got under the [World Trade Organization] and use them aggressively. But more importantly, we’ve got to get our house in order here. We have less leverage at the negotiating table today with China and less clout because our own economy is broken. If you want to get the attention of the Chinese – and I can tell you having done this for 30 years both in business and in government – you’ve got to have some leverage and some economic strength behind you. We have to restore our economic core and that would do more for our leverage than any WTO case.

We’ve also got, and I did this as ambassador, to engage the emerging private sector in China to begin to push issues like intellectual property protection because it is in their interest as innovators and entrepreneurs and creators to make sure China steps up and and does more. I lived in Taiwan in the 1980s.  Taiwan was an egregious violator on the enforcement side of intellectual property rights, as bad as China has been in recent years. But the minute their entrepreneurial class started to develop their own intellectual property, they turned on a dime and lobbied their own government. That same creative class is emerging very, very quickly in China.

On dealing with climate change …

China and India are not willing to play on the same playing field. And we should not be unilaterally disarming, in a sense, especially at at a time when we need to get this economy back on its feet. The last thing we should be doing is anything that would hinder job growth and economic expansion. I am not going to have any discussion about it until such time as we get China and India tuned into the issue. They’re not now, and I don’t thing they will be for some time.

COMMENT

Coyottte,

The country is hardly operating from laissez-faire economics. Federal interfence in the housing market, creatijng Fannie, Freddie, and the Community reinvestment Act, along with exceessively loose monetary policy and decades of defitict spending, brought us to our currnet sorry state. The last thing in the world this country needs right now is more regulation.

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