James Pethokoukis

Politics and policy from inside Washington

Just how badly broken is the U.S. economy?

Feb 4, 2011 19:42 UTC

This bit on the January jobs report from Bankofamericamerrilllynch worries me:

In the Household Survey, the unemployment rate plunged 0.4ppt for the second month in a row bringing it to 9.0% – the lowest since April 2009. The unemployment rate has not dropped this far, this fast since the 1950s. So, we question whether this decline will be sustained. The household measure of employment rose just 117,000 while the labor force participation rate dropped 0.1 ppt to a fresh cycle low of 64.2%. Never before has such a sharp decline in the unemployment rate been predicated on an ongoing drop in the labor force. The participation rate has crumbled 1.5ppts since the recovery began.

This labor force detachment tell us two things that should give even the most bullish of market participants room for pause: (1) structural unemployment is rising and (2) the potential rate of growth in the U.S. is slowing. Perhaps this is one reason why the Treasury market is selling off sharply in the aftermath of today’s report. More structural unemployment and weak potential growth imply less slack in the economy and raise an inflation risk.

And this chart from ITG Investment Research does not make me feel any better:


Gen. Paul Ryan launches his war on Big Government

Feb 4, 2011 18:44 UTC

In the context of World War II, this was the Doolittle Raid. D-Day still awaits in the future.

I think if House Republicans consisted of Paul Ryan and 241 of his clones, the first round of budget cuts coming out of the House Budget Committee might have been more Rand Paul-esque. Something more in the hundreds of billions of dollars. A grand slam.

But, to mix metaphors, what Ryan did manage is a solid double into the gap, with the runner making it to second base standing up.  Ryan’s plan would save $74 billion relative to the Obama budget, $58 billion in non-security spending and $16 billion below Obama’s request for security spending. Non-security spending would be cut to $420 billion or about $40 billion below current levels with an additional $8 billion added for defense and security needs.

Of course, if these cuts were the end of story, they would be disappointing. But I am sure there will be more to come, hopefully accompanied by proposals to reform entitlements. Not the end of the beginning or the beginning of the end. Just the beginning of the beginning.


General Ryan is typical of career bureaucrats. They talk like Richard Nixon. Their mantra is obfuscation and hundreds of billions for the military gravy train. Then like Reagan they make people believe they won the Cold War which was really over before ‘Bonzo’ became President. If the so-called
consevatives really are serious about cutting the federal budget they need to take low and middle income people off income taxes; cut the military budget to $400 billion; phase out social security and medicare; repeal voluntary military; repeal the Dept. of Domestic Security; cut out agriculture subsidies; create a Dept. of Nutrition to replace all agencies which deal with food; allow medical professionals to prescribe behavioral drugs; fix the national infrasture asap; get freight of the highways and onto the rails; create a national mass transit system run by electricity generated by nuclear power; turn the District of Columbia back to Maryland and move the federal capitol to the Kansas City area; get rid of the Dept. of Interior; get rid of all socialistic federal programs that denigrate the Bill of Rights; make it illegal to receive a federal pension and work in any other job; set up by law a livable annual income which will enable every citizen to achieve individual self-sufficiency; require States to license any and all healthcare professionals; set up a national healthcare system that people can join to get healthcare, drugs and all other medical services to compete with the private system which now causes inflated healthcare costs; get rid of the FDA and the medical professionals who are in cahoots with the pharmaceutical industry. If the pols in DC could pass all of those reforms America would come back if they also dumped the Federal Reserve System which is run by Wall Street and the Judeo-Christian Big Business Coalition of fascist dictators.

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Reagan at 100, Reaganomics at 30

Feb 4, 2011 12:35 UTC

President Ronald Reagan, Feb. 5, 1981:

Good evening.

I’m speaking to you tonight to give you a report on the state of our Nation’s economy. I regret to say that we’re in the worst economic mess since the Great Depression.

A few days ago I was presented with a report I’d asked for, a comprehensive audit, if you will, of our economic condition. You won’t like it. I didn’t like it. But we have to face the truth and then go to work to turn things around. And make no mistake about it, we can turn them around.

I’m not going to subject you to the jumble of charts, figures, and economic jargon of that audit, but rather will try to explain where we are, how we got there, and how we can get back. First, however, let me just give a few “attention getters” from the audit.

The Federal budget is out of control, and we face runaway deficits of almost $80 billion for this budget year that ends September 30th. That deficit is larger than the entire Federal budget in 1957, and so is the almost $80 billion we will pay in interest this year on the national debt.

Twenty years ago, in 1960, our Federal Government payroll was less than $13 billion. Today it is 75 billion. During these 20 years our population has only increased by 23.3 percent. The Federal budget has gone up 528 percent.

Now, we’ve just had 2 years of back-to-back double-digit inflation — 13.3 percent in 1979, 12.4 percent last year. The last time this happened was in World War I.

In 1960 mortgage interest rates averaged about 6 percent. They’re 2\1/2\ times as high now, 15.4 percent.

The percentage of your earnings the Federal Government took in taxes in 1960 has almost doubled.

And finally there are 7 million Americans caught up in the personal indignity and human tragedy of unemployment. If they stood in a line, allowing 3 feet for each person, the line would reach from the coast of Maine to California.

Well, so much for the audit itself. Let me try to put this in personal terms. Here is a dollar such as you earned, spent, or saved in 1960. And here is a quarter, a dime, and a penny — 36 cents. That’s what this 1960 dollar is worth today. And if the present world inflation rate should continue 3 more years, that dollar of 1960 will be worth a quarter. What initiative is there to save? And if we don’t save we’re short of the investment capital needed for business and industry expansion. Workers in Japan and West Germany save several times the percentage of their income than Americans do.

What’s happened to that American dream of owning a home? Only 10 years ago a family could buy a home, and the monthly payment averaged little more than a quarter — 27 cents out of each dollar earned. Today, it takes 42 cents out of every dollar of income. So, fewer than 1 out of 11 families can afford to buy their first new home.

Regulations adopted by government with the best of intentions have added $666 to the cost of an automobile. It is estimated that altogether regulations of every kind, on shopkeepers, farmers, and major industries, add $100 billion or more to the cost of the goods and services we buy. And then another 20 billion is spent by government handling the paperwork created by those regulations.

I’m sure you’re getting the idea that the audit presented to me found government policies of the last few decades responsible for our economic troubles. We forgot or just overlooked the fact that government — any government — has a built-in tendency to grow. Now, we all had a hand in looking to government for benefits as if government had some source of revenue other than our earnings. Many if not most of the things we thought of or that government offered to us seemed attractive.

In the years following the Second World War it was easy, for a while at least, to overlook the price tag. Our income more than doubled in the 25 years after the war. We increased our take-home pay in those 25 years by more than we had amassed in all the preceding 150 years put together. Yes, there was some inflation, 1 or 1\1/2\ percent a year. That didn’t bother us. But if we look back at those golden years, we recall that even then voices had been raised, warning that inflation, like radioactivity, was cumulative and that once started it could get out of control.

Some government programs seemed so worthwhile that borrowing to fund them didn’t bother us. By 1960 our national debt stood at $284 billion. Congress in 1971 decided to put a ceiling of 400 billion on our ability to borrow. Today the debt is 934 billion. So-called temporary increases or extensions in the debt ceiling have been allowed 21 times in these 10 years, and now I’ve been forced to ask for another increase in the debt ceiling or the government will be unable to function past the middle of February — and I’ve only been here 16 days. Before we reach the day when we can reduce the debt ceiling, we may in spite of our best efforts see a national debt in excess of a trillion dollars. Now, this is a figure that’s literally beyond our comprehension.

We know now that inflation results from all that deficit spending. Government has only two ways of getting money other than raising taxes. It can go into the money market and borrow, competing with its own citizens and driving up interest rates, which it has done, or it can print money, and it’s done that. Both methods are inflationary.

We’re victims of language. The very word “inflation” leads us to think of it as just high prices. Then, of course, we resent the person who puts on the price tags, forgetting that he or she is also a victim of inflation. Inflation is not just high prices; it’s a reduction in the value of our money. When the money supply is increased but the goods and services available for buying are not, we have too much money chasing too few goods. Wars are usually accompanied by inflation. Everyone is working or fighting, but production is of weapons and munitions, not things we can buy and use.

Now, one way out would be to raise taxes so that government need not borrow or print money. But in all these years of government growth, we’ve reached, indeed surpassed, the limit of our people’s tolerance or ability to bear an increase in the tax burden. Prior to World War II, taxes were such that on the average we only had to work just a little over 1 month each year to pay our total Federal, State, and local tax bill. Today we have to work 4 months to pay that bill.

Some say shift the tax burden to business and industry, but business doesn’t pay taxes. Oh, don’t get the wrong idea. Business is being taxed, so much so that we’re being priced out of the world market. But business must pass its costs of operations — and that includes taxes — on to the customer in the price of the product. Only people pay taxes, all the taxes. Government just uses business in a kind of sneaky way to help collect the taxes. They’re hidden in the price; we aren’t aware of how much tax we actually pay.

Today this once great industrial giant of ours has the lowest rate of gain in productivity of virtually all the industrial nations with whom we must compete in the world market. We can’t even hold our own market here in America against foreign automobiles, steel, and a number of other products. Japanese production of automobiles is almost twice as great per worker as it is in America. Japanese steelworkers outproduce their American counterparts by about 25 percent.

Now, this isn’t because they’re better workers. I’ll match the American working man or woman against anyone in the world. But we have to give them the tools and equipment that workers in the other industrial nations have.

We invented the assembly line and mass production, but punitive tax policies and excessive and unnecessary regulations plus government borrowing have stifled our ability to update plant and equipment. When capital investment is made, it’s too often for some unproductive alterations demanded by government to meet various of its regulations. Excessive taxation of individuals has robbed us of incentive and made overtime unprofitable.

We once produced about 40 percent of the world’s steel. We now produce 19 percent. We were once the greatest producer of automobiles, producing more than all the rest of the world combined. That is no longer true, and in addition, the “Big Three,” the major auto companies in our land, have sustained tremendous losses in the past year and have been forced to lay off thousands of workers.

All of you who are working know that even with cost-of-living pay raises, you can’t keep up with inflation. In our progressive tax system, as you increase the number of dollars you earn, you find yourself moved up into higher tax brackets, paying a higher tax rate just for trying to hold your own. The result? Your standard of living is going down.

Over the past decades we’ve talked of curtailing government spending so that we can then lower the tax burden. Sometimes we’ve even taken a run at doing that. But there were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.

It’s time to recognize that we’ve come to a turning point. We’re threatened with an economic calamity of tremendous proportions, and the old business-as-usual treatment can’t save us. Together, we must chart a different course.

We must increase productivity. That means making it possible for industry to modernize and make use of the technology which we ourselves invented. That means putting Americans back to work. And that means above all bringing government spending back within government revenues, which is the only way, together with increased productivity, that we can reduce and, yes, eliminate inflation.

In the past we’ve tried to fight inflation one year and then, with unemployment increased, turn the next year to fighting unemployment with more deficit spending as a pump primer. So, again, up goes inflation. It hasn’t worked. We don’t have to choose between inflation and unemployment — they go hand in hand. It’s time to try something different, and that’s what we’re going to do.

I’ve already placed a freeze on hiring replacements for those who retire or leave government service. I’ve ordered a cut in government travel, the number of consultants to the government, and the buying of office equipment and other items. I’ve put a freeze on pending regulations and set up a task force under Vice President Bush to review regulations with an eye toward getting rid of as many as possible. I have decontrolled oil, which should result in more domestic production and less dependence on foreign oil. And I’m eliminating that ineffective Council on Wage and Price Stability.

But it will take more, much more. And we must realize there is no quick fix. At the same time, however, we cannot delay in implementing an economic program aimed at both reducing tax rates to stimulate productivity and reducing the growth in government spending to reduce unemployment and inflation.

On February 18th, I will present in detail an economic program to Congress embodying the features I’ve just stated. It will propose budget cuts in virtually every department of government. It is my belief that these actual budget cuts will only be part of the savings. As our Cabinet Secretaries take charge of their departments, they will search out areas of waste, extravagance, and costly overhead which could yield additional and substantial reductions.

Now, at the same time we’re doing this, we must go forward with a tax relief package. I shall ask for a 10-percent reduction across the board in personal income tax rates for each of the next 3 years. Proposals will also be submitted for accelerated depreciation allowances for business to provide necessary capital so as to create jobs.

Now, here again, in saying this, I know that language, as I said earlier, can get in the way of a clear understanding of what our program is intended to do. Budget cuts can sound as if we’re going to reduce total government spending to a lower level than was spent the year before. Well, this is not the case. The budgets will increase as our population increases, and each year we’ll see spending increases to match that growth. Government revenues will increase as the economy grows, but the burden will be lighter for each individual, because the economic base will have been expanded by reason of the reduced rates.

Now, let me show you a chart that I’ve had drawn to illustrate how this can be.

Here you see two trend lines. The bottom line shows the increase in tax revenues. The red line on top is the increase in government spending. Both lines turn upward, reflecting the giant tax increase already built into the system for this year 1981, and the increases in spending built into the ’81 and ’82 budgets and on into the future. As you can see, the spending line rises at a steeper slant than the revenue line. And that gap between those lines illustrates the increasing deficits we’ve been running, including this year’s $80 billion deficit.

Now, in the second chart, the lines represent the positive effects when Congress accepts our economic program. Both lines continue to rise, allowing for necessary growth, but the gap narrows as spending cuts continue over the next few years until finally the two lines come together, meaning a balanced budget.

I am confident that my administration can achieve that. At that point tax revenues, in spite of rate reductions, will be increasing faster than spending, which means we can look forward to further reductions in the tax rates.

Now, in all of this we will, of course, work closely with the Federal Reserve System toward the objective of a stable monetary policy.

Our spending cuts will not be at the expense of the truly needy. We will, however, seek to eliminate benefits to those who are not really qualified by reason of need.

As I’ve said before, on February 18th I will present this economic package of budget reductions and tax reform to a joint session of Congress and to you in full detail.

Our basic system is sound. We can, with compassion, continue to meet our responsibility to those who, through no fault of their own, need our help. We can meet fully the other legitimate responsibilities of government. We cannot continue any longer our wasteful ways at the expense of the workers of this land or of our children.

Since 1960 our government has spent $5.1 trillion. Our debt has grown by 648 billion. Prices have exploded by 178 percent. How much better off are we for all that? Well, we all know we’re very much worse off. When we measure how harshly these years of inflation, lower productivity, and uncontrolled government growth have affected our lives, we know we must act and act now. We must not be timid. We will restore the freedom of all men and women to excel and to create. We will unleash the energy and genius of the American people, traits which have never failed us.

To the Congress of the United States, I extend my hand in cooperation, and I believe we can go forward in a bipartisan manner. I’ve found a real willingness to cooperate on the part of Democrats and members of my own party.

To my colleagues in the executive branch of government and to all Federal employees, I ask that we work in the spirit of service.

I urge those great institutions in America, business and labor, to be guided by the national interest, and I’m confident they will. The only special interest that we will serve is the interest of all the people.

We can create the incentives which take advantage of the genius of our economic system — a system, as Walter Lippmann observed more than 40 years ago, which for the first time in history gave men “a way of producing wealth in which the good fortune of others multiplied their own.”

Our aim is to increase our national wealth so all will have more, not just redistribute what we already have which is just a sharing of scarcity. We can begin to reward hard work and risk-taking, by forcing this Government to live within its means.

Over the years we’ve let negative economic forces run out of control. We stalled the judgment day, but we no longer have that luxury. We’re out of time.

And to you, my fellow citizens, let us join in a new determination to rebuild the foundation of our society, to work together, to act responsibly. Let us do so with the most profound respect for that which must be preserved as well as with sensitive understanding and compassion for those who must be protected.

We can leave our children with an unrepayable massive debt and a shattered economy, or we can leave them liberty in a land where every individual has the opportunity to be whatever God intended us to be. All it takes is a little common sense and recognition of our own ability. Together we can forge a new beginning for America.

Thank you, and good night.


And the Reagan-worship begins…

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Why Obama’s magic number for reelection isn’t 270, it’s 215 (thousand jobs)

Feb 3, 2011 23:34 UTC

Team Obama would surely love to run a Reaganesque, “Morning in America” reelection campaign, cruising to victory by taking credit for a dynamic economic recovery. But for that scenario to play out — or anything close to it — the unemployment rate would have to drop a whole lot. (The president’s political advisers will be closely watching the January jobs report.)  In a new research note, analyst Matt McDonald of Hamilton Place Strategies, a policy advisory and strategic communications consultancy in Washington, makes the following points:

1) Usually in presidential election years, the magic number to watch is 270. But for 2012, the magic number may actually be 215. That is how many thousands of jobs the economy has to create every month for the unemployment rate to drop below 8 percent by Election Day 2012.

2) Since 1960, the unemployment rate has been above 7 percent during four elections: 1976,1980, 1984 and 1992. In three of these 4 elections, the incumbent party lost. Only in 1984 did Reagan win with 7.2 percent unemployment, which was in the context of a 1.3 percentage point drop in unemployment during the year prior to the election.

3) For President Obama, with a current unemployment rate of 9.4 percent, an unemployment rate below 7 percent is hard to envision by November 2012. However over the coming 2 years, he would see an improved political position from a significant drop in the unemployment rate. Current economic forecasting projects a fourth quarter 2012 unemployment rate of approximately 8 percent (CEA: 7.7 percent; CBO: 8.2 percent; Blue Chip: 8.4 percent). If the unemployment rate can break this 8 percent level, President Obama can credibly argue that he is making progress on jobs, even though the unemployment rate will still be historically high.

4) If we assume a straight-line projection of job growth and further assume 120,000 new entrants to the job market every month, the economy would need to create 215,000 jobs per month every month between now and November 2012 to get the unemployment rate below 8 percent. Every month we are above 215,000 new jobs, it gets a little easier to reach that 8 percent goal and every month we are below 215,000, it gets a little harder. This is the benchmark that interested parties should be watching tomorrow as the January jobs numbers are released.

McDonald does note a big complicating factor. Discouraged workers could rejoin the workforce as prospects improve. “This would have the effect of increasing the number of jobs needed each month to reduce the unemployment rate,” he notes.

Indeed, if the workforce had not shrunk so much during the downturn, the unemployment rate right now would be higher than at any point since the Great Depression. On the other hand, some economic observers, including those on the Federal Reserve, think the workforce may stay small. The longer people stay out of work, the longer they tend to stay on the sidelines since employers become biased against them. In addition, it’s unlikely that unemployed home construction workers or mortgage lenders will find their industries bouncing back anytime soon.

But whether Obama joins the unemployed in January 2013 may depend on whether 215,000 Americans find a job every month between now and Election Day 2012.

Time for new rules to limit Washington spending

Feb 3, 2011 17:47 UTC

If only U.S. Treasuries had covenants like corporate debt does. Instead of linking to EBITDA, metrics like borrowing or spending as a share of GDP could be used. That might be a stretch, but lawmakers are still trying to implement new fiscal rules. It’s an idea whose time has come – or at least come back.

Back in 1985, Congress passed a law requiring it to meet annual deficit targets on the way to a balanced budget in 1991. On its face, the effort was a complete bust. Congress routinely evaded the yearly limits, and the 1991 budget was $269 billion in the red. But much fiscal good was done. Before the recession hit in 1990-91, the deficit had fallen to 2.8 percent of GDP from 5.1 percent, while the rate of annual discretionary spending (excluding social insurance programs) also had declined substantially.

Two legislators have taken up the cause anew. Senators Bob Corker of Tennessee, a Republican, and Claire McCaskill of Missouri, a Democrat, want to reduce spending over 10 years to a cap of 20.6 percent of GDP, the 40-year historical average. Exceeding that limit would result in across-the-board spending cuts that could only be waived by supermajority votes in both chambers. Based on Congressional Budget Office baseline forecasts, hitting the proposed Corker-McCaskill target would create a small projected surplus.

Some argue the cap is far too low given an aging U.S. population, rising healthcare costs and higher debt interest payments. Indeed, it would require a hefty 20 percent Medicare cut by 2025. But such reductions aren’t unreasonable, says the CBO, if Medicare was to be turned into a subsidized voucher program for seniors, as some Republicans propose.

The Obama debt commission had a slightly different perspective, arguing for limits that focused on debt instead of spending. It’s an approach the International Monetary Fund also endorses. But whatever form such rules might take, expect the general concept to be a part of the debate over raising the U.S debt ceiling. Congress would still hold the key to its own fiscal handcuffs, of course. But escaping austerity might prove just a bit harder.

Democrat control of Senate could fall victim to Obamacare

Feb 3, 2011 16:37 UTC

Ed Carson of IBD’s Capital Hill blog, highlight the 11 red state senators who voted against repealing Obamacare:

Eleven Democrats up for re-election next year represent states in which Republicans won a majority of the 2010 popular vote for House seats: Florida, Michigan, Missouri, Montana, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia and Wisconsin.

Especially vulnerable:

* Montana’s Jon Tester and Missouri’s Claire McCaskill won in 2006 with less than 50% of the vote.

* Ben Nelson of Nebraska may have sealed his fate with his infamous “Cornhusker Kickback” in exchange for being the 60th ObamaCare vote.

* Virginia’s Jim Webb, who narrowly won in 2006, is at least semi-vulnerable. And he could retire after a single term, some have speculated.

Meanwhile, a 12th red-state Democrat, North Dakota’s Kent Conrad, recently announced he would not seek another term. That seems a likely GOP pickup.

Some other longtime Democratic senators could choose to retire, especially if they face the prospect of a grueling campaign. For example, Wisconsin’s Herb Kohl will be 77 in 2012.

I know it’s early, but it would be  very surprising, I think, for Rs not to retake the Senate next year. The Dems really needed to make a better showing in 2010 given how many seats they have to defend in 2012 and 2014.

Saying ‘buh-bye’ to Obamacare

Feb 3, 2011 16:14 UTC

The always insightful Keith Hennessey show the path to repeal:

The path to repeal is straightforward and, while difficult, achievable. … In 2012 win the White House, hold the House majority, and pick up a net 3 Republican Senate seats to retake the majority there. … In 2013, use reconciliation to repeal ObamaCare, requiring only a simple majority in the Senate. … Repeal of the subsidies, the individual mandate, the insurance provisions, and the Medicaid expansions would, in each case, directly affect spending and revenues, so it would be a straight-up-the-middle use of reconciliation for deficit reduction. Democrats who argued in 2009 that it was OK to use reconciliation to create these provisions would find those same rulings working against them in 2013.

At the moment Democrats are hanging their hat on the CBO-scored deficit reduction associated with the two laws. This CBO score means that a straight repeal amendment faces a Budget Act point of order and therefore needs 60 votes to succeed. If Republicans were in 2013 to try to repeal the laws as-is, CBO would score them with increasing the deficit. That’s not impossible to do through reconciliation, but it’s a trickier path.

Still, this is a solvable problem. The best policy way to address this would be to leave some (most?) of the Medicare savings in place, and not repeal them. I’d also favor leaving the “Cadillac tax” on high cost health plans in place.


Can we please get back to jobs…Pretty-pretty please. Symbolism is sticking a knife in the back of America the beautiful.

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America and the world, in one chart

Feb 3, 2011 16:05 UTC

My pal Tim Kane over at Growthology offers up a way at comparing the U.S. and everybody else:


Any way you slice it, U.S. corporate tax rates are too high

Feb 2, 2011 20:35 UTC

David Leonhardt (NYT) makes the point that U.S. companies often pay far less than the top statutory corporate tax rate of 35 percent:

Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.

Arguably, the United States now has a corporate tax code that’s the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades. …

The problem with the current system is that it distorts incentives. Decisions that would otherwise be inefficient for a company — and that are indeed inefficient for the larger economy — can make sense when they bring a big tax break. “Companies should be making investments based on their commercial potential,” as Aswath Damodaran, a finance professor at New York University, says, “not for tax reasons.”

Instead, airlines sometimes buy more planes than they really need. Energy companies drill more holes. Drug companies conduct research with only marginal prospects of success.

Inefficiencies like these slow economic growth, and they are the reason that both conservatives and liberals criticize the corporate tax code so harshly. Mitch McConnell, the Republican Senate leader, says it hurts job creation. Mr. Obama, in his State of the Union address, said that the system “makes no sense, and it has to change.”

It should also be noted that whether you are talking about the statutory rate or the effective rate, the U.S. is still at uncompetitive levels (via Tax Foundation):




Rubbish. Any taxes at all are too high for James Pethokoukis. Corporate tax rates in the United States are among the lowest in the world. Combine that with the loopholes that corporate lobbyists have bought for their clients, and most US corporations pay no tax at all.

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