Obamanomics Takes a Holiday
A two-year tax reprieve is better than current law but far from ideal
Does President Obama like or loathe the two-year tax deal he has struck with Republicans? It was hard to tell from his grudging, testy remarks Monday and yesterday, but perhaps that's because he realizes he is repudiating the heart and soul of Obamanomics as the price of giving himself a chance at a second term.
In accepting the deal to cut payroll and business taxes and extend all of the Bush-era tax rates through 2012, Mr. Obama has implicitly admitted that his economic strategy has flopped. He is acknowledging that tax rates matter to growth, that treating business like robber barons has hurt investment and hiring, and that tax cuts are superior to spending as stimulus. It took 9.8% unemployment and a loss of 63 House seats for this education to sink in, but the country will benefit.
In this sense, the political symbolism is as important as the policy. Mr. Obama is signaling that businesses must be encouraged to make profits again so they can hire more workers, that "the rich" he so maligns should be able to keep more of what they earn, and even that wealth built up over a lifetime shouldn't be confiscated wholesale at death. In policy if not in Presidential rhetoric, class war and income redistribution are taking a two-year holiday.
This is not to say the deal is optimal for economic growth, and Republicans should not pretend it is. A two-year reprieve is far better than an immediate tax increase amid a still fragile recovery, but it also means that the policy uncertainty is carried forward. In the Keynesian universe, "temporary" tax cuts are virtuous because they stimulate immediately while ostensibly allowing government to reclaim the revenue later when the economy is stronger.
In the real world, businesses make investments based on the estimated return on capital over time, including the expected tax rate. What matters is the overall cost of, and return on, capital. The temporary nature of the tax cuts will provide less incentive to invest than would permanent reductions in the cost of capital
The provision to allow business a 100% expensing deduction for 2011, and 50% in 2012, will help growth in those years. But it will do so in part by pulling investment forward from 2013. This is good for President Obama's re-election chances, but not so good for increasing the permanent level of business investment.
The same goes for the temporary cut in the payroll tax in the name of encouraging more hiring. The one-year cut to 4.2% from 6.2% in the employee portion of the Social Security tax increases the incentive to work. Because it doesn't favor some workers over others, it is also superior to the tax credits that Democrats wanted. But the proposal does nothing to reduce employer costs, even as ObamaCare is raising those costs as its mandates and regulations take effect.
This incentive to work also conflicts with the disincentive to work provided by another extension in jobless benefits. The deal's 13-month extension will cost taxpayers about $56 billion. As economist Larry Summers noted before he joined the White House, every jobless person has a "reservation wage," or the minimum wage he'll accept to take a job. The jobless rate will thus stay higher for longer as benefits induce some people to hold out for a better job than those that are available.
Another half-victory is the provision to set the estate tax at 35%, with an exclusion of $5 million. The rate was set to return to 55% with a $1 million exclusion on January 1, and Mr. Obama had wanted 45%. While the 35% rate also lasts only two years, the level of bipartisan support will make this rate politically difficult to increase even if Mr. Obama wins re-election...
As for Democrats, many and perhaps most in Congress will oppose this deal as an ideological betrayal by Mr. Obama, but it is really an admission of reality. Democrats lost the election because their economic policies failed. Their caterwauling now is mostly short-attention-span theater for the MSNBC crowd.
Fascist Thinking at the FCC
A member of the Federal Communications Commission appears to want Washington in control of broadcast news. What a shame that people with such ideas are placed in positions of power.
The FCC's Michael Copps suggested last week that a "public value test" should determine who holds broadcast licenses for television and radio. Speaking at Columbia University's Graduate School of Journalism, he said he was looking for "a renewed commitment to serious news and journalism."
So are we. We're weary of the hard-left bias ever so present in the media. We're fed up with celebrity treatment of all those on the left and contempt for all those on the right who aren't Republicans in name only. We've had enough of a press corps that makes no effort to understand economics and keeps promoting tired, freedom-choking, statist ideology.
We've been frustrated, as well, by networks that keep framing the issue — by 6-to-1, according to the Media Research Council — as a debate about "tax cuts for the rich" rather than a simple continuation of current rates.
And we're still dismayed by the media's refusal to look into Barack Obama's thin background during the 2008 presidential campaign, while digging up everything they could on Sarah Palin to portray her as an inexperienced ditz.
But there's another difference between us and Copps: We're not willing to use the police power of the state to force the outcome we prefer.
According to the Hill newspaper, Copps would issue licenses only when broadcasters: "Prove they have made a meaningful commitment to public affairs and news programming, prove they are committed to diversity programming, report more to the government about which shows they plan to air, require greater disclosure about who funds political ads and devote 25% of their prime-time coverage to local news."
Who is Copps to make such demands? And why does a man who thinks like a tyrant hold such a high-ranking position in the U.S. government?
His appetite for power isn't new. It's been simmering for some time. He has a history of campaigning against media ownership laws that advance freedom, preferring instead regulations that limit how many media outlets one owner can have in a market.
"Why does any corporate interest need to own three stations in any city, other than to enjoy the 40%-50% profit margins most consolidated stations are racking up?" he wrote in 2003 in response to a proposal to relax media ownership rules.
In a free society, it's not for Copps or anyone else to ask why any corporate interest needs to own three stations in one city. Liberty doesn't always produce the conditions we like. But it never produces results that are damaging.
If one company owned every news outlet in the country, we'd have reservations. But that situation, as uncomfortable as it might be, would not violate the life, liberty or property of a single person.
But Copps' ideas would. A company's freedom to operate without government interference is infringed upon if that company must meet any of his standards if it's to have its broadcast license renewed.
It's reasonable to ask, as Republican Rep. Joe Barton of Texas did in a letter to Copps this week, if the commissioner means to give the federal government the power to determine what content is available for Americans to consume. Frankly, it's hard to interpret his remarks any other way; they are so consistent with his history of wanting to impose his ideas on others.
Three years ago, the FCC voted to eliminate some of its statist ownership rules. Copps and another Democrat were against the change, but the proposal passed on the three GOP votes. This was not a radical change but a marginal deregulatory shift toward greater freedom in the market. And some rules remain.
They're not enough, though, for Copps and like-minded leftists. They continue to rail at large media companies and media consolidation as if they were hatched in Hades, and grumble about a lack of diversity among owners.
Absent in their rants is any concern about the dominance of left-leaning journalism that has corrupted American thinking for decades. But then, that's expected because this deeply biased state of affairs is what they're trying to protect.
Don't Ask, Don't Tell, Don't Call Our Troops Homophobes
The Pentagon's poll on "don't ask, don't tell" is beyond idiotic. Instead of asking whether the troops support repeal of DADT, the Pentagon asked only if they can learn to play nice with the gays.
Even more absurdly, the Pentagon polled all military "personnel" -- and their spouses! Only a small portion of what is known as "the military" actually does the fighting. The rest is a vast bureaucracy along the lines of the DMV.
Today's military features "victim advocates" and sensitivity training facilitators, the Defense Advisory Committee on Women in the Services personnel and a million other goo-goo positions. How did we ever take the shores of Normandy without a phalanx of "sensitivity training" counselors?
No one has any need to be reassured that the military's "social action" staff will enjoy working with gays. Whatever a career in "social action" entails, it better be gay-friendly. Frankly, it's appalling the Pentagon's poll of all military personnel and their families didn't produce better numbers for the gays.
We're interested in what the men who fight think. As the Pentagon study itself reports: "A higher percentage of service members in war-fighting units predicted negative effects." So gays openly serving in the military will harm the "war-fighting" part of the military, but the "social action" part will thrive!
Naturally, Marines are the most resistant to overturning "don't ask, don't tell," with 58 percent of those in combat opposed.
Who cares if the Pentagon's sexual harassment task force supports gays in the military? The combat units don't, and they're the ones who do the job. The rest of us shouldn't get to vote on gays in the military any more than we get to vote on the choreography of "Chicago."
Military combat is a very specialized field comparable to nothing in civilian life. There has to be a special bond among warriors -- and only one kind of bond. The soldierly bond gets confused if some guys think their comrades are hot or if they suspect their superior is having a relationship with a fellow soldier.
It's the same confusion that results from putting girls in the military. When an officer makes a decision, nothing should enter into it except his views on the best military strategy.
The military part of the military has valid reasons for wanting to separate the idea of martial ardor and sexual attraction. Combat units can't have anything that interferes with unit cohesion, such as, for example, platoon members who are dating one another. Racial prejudice is not the same thing as sexual attraction, so please stop telling us this is just like integrating blacks in the military.
A Military Times survey in 2005 found that nearly half of all women in the military claim to have been the victim of sexual harassment -- ludicrously more than women in civilian life. By contrast, two-thirds of minorities said they were treated better in the military than in society at large.
The Pentagon's report found that service members "repeatedly" said that allowing gays to serve openly would "lead to widespread and overt displays of effeminacy," as well as "harassment" and unwelcome advances. (To which I would add, "and the occasional leak of massive amounts of classified documents.")
Gays in the military understand this better than heterosexuals in civilian life. According to the Pentagon's survey, only 15 percent of gays currently serving said they would want their units to know they're gay. (Also, 2 percent of gays currently serving giggled when asked about their "unit," which is down from 5 percent from last year.)
There are far more discharges for pregnancy and "parenthood" than for homosexuality. In the past five years, less than 1 percent of all unplanned military discharges (i.e. not due to retirement or completion of service) were for homosexuality.
Here's a record of the discharges for 2008, according to the Defense Department:
-- Drugs: 5,627
-- Serious offenses: 3,817
-- Weight standards: 4,555
-- Pregnancy: 2,353
-- Parenthood: 2,574
-- Homosexuality: 634
The main lesson from these figures isn't that we should have gays openly serving in the military, but that we need to get girls out of the military, inasmuch as they are constantly being discharged for pregnancy, parenthood and weight issues.
According to a 1998 Department of Defense report, most discharges based on homosexuality involved "junior personnel with very little time in the military" and "the great majority of discharges for homosexual conduct are uncontested and processed administratively." More than 98 percent of discharges for homosexuality were honorable.
So gays and girls can join the military, get taxpayers to foot the bill for their education and then, when it comes time to serve, announce that they're gay or pregnant and receive an honorable discharge. Indeed, there's no proof that all the discharges for homosexuality involve actual homosexuals.
Why can't the Army and Marines have their own rules? Why does everything have to be the same? Whatever happened to "diversity"?
Most people have no clue what military life is like, least of all the opinion makers in New York, Los Angeles and the nation's capital. The military is not representative of the country at large. It is disproportionately rural, small-town, Southern and Hispanic.
We ask our troops to do a lot for very little money. Sometimes they die for us. The least Democrats could do is not pass grandstanding bills while self-righteously denouncing our servicemen as homophobes.
Report: 42.9 million in US receiving food stamps: "The number of Americans receiving food stamps rose to a record 42.9 million in September as the jobless rate stayed near a 27-year high, the government said. Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases jumped 16 percent from a year earlier and increased 1.2 percent from August, the US Department of Agriculture said yesterday in a statement on its website. Participation has set records for 22 straight months.”
Washington DC region's jobless rate falls to 5.8 percent: "The unemployment rate in the Washington region dropped to 5.8 percent in October from 6.3 percent a year ago, according to federal government data released Tuesday. Analysts credited the decrease to a rebound in the retail and restaurant segments sparked by a growing willingness among consumers to spend money. The region also led the nation in the number of jobs added in a 12-month period, according to the Bureau of Labor Statistics. It was the second straight month in which the unemployment level dropped significantly in the Washington area. In September, the region's not seasonally adjusted jobless rate fell to 5.9 percent, from 6.2 percent the year before"
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