Here’s a “shocker”: U.S. companies that operate overseas are keeping profits there and investing rather than repatriating the profits — because of punitive taxation. According to Frank Aquila at Bloomberg News, there may be as much as $1 trillion of U.S. profits overseas that are simply not being repatriated.
Why? Because it would mean a stiff tax on those businesses.
Recently, Congress severely limited the use of the Section 956 foreign income tax credit by U.S. companies that operate overseas as a part of a bill that included a $26.1 billion bailout to bankrupt states like New York and California. As a result, the U.S. is now simply missing out on foreign-generated capital flows back into the economy. This is a trend that will only grow worse unless the imbalance is restored.
U.S. companies are being incentivized to create jobs and expand operations overseas by our own punitive tax structure. This makes no sense. Through an anti-competitive tax environment, high labor costs, and inflated property values, the U.S. is driving investment and jobs into the arms of foreigners.
Aquila calls for a holiday on this tax, but why not eliminate it all together? Overseas companies are already taxed in the nations they do business in. The difference is that they are taxed at much lower rates than the U.S. where the corporate tax is 35 percent. Under the new law, companies cannot claim a tax credit for those overseas profits. So, they’re just not repatriating the profits.
This tax is literally killing capital flows back into the economy. If there’s really as much as $1 trillion in U.S. profits not being reinvested here, we’re committing economic suicide. If the tax were eliminated, the repatriated profits would more than make up for the trade deficit to China, which was $227 billion in 2009.
It is capital that could be used to create jobs here and increase the nation’s productive capacity. Foreign companies like Toyota have more of an incentive to build a factory in America than some U.S. companies do. Because Toyota is not taxed when it wants to invest in America. But an American company is — if its profits are coming from overseas.
What’s the sense of the nation exporting anything or expanding overseas if the profits are not reinvested here? China repatriates its earnings. Taxing foreign income is the equivalent of a business encouraging investors to put their money into competitors across the street.
So, while Congress and Treasury Secretary Timothy Geithner are busy obsessing over the Chinese yuan’s fixed exchange rate, perhaps they should instead turn their attention to the globally uncompetitive situation the U.S. economy is in.
The House recently passed legislation that would make “undervalued” currencies be considered by the Department of Commerce as a subsidy under World Trade Organization (WTO) rules. This will enable higher countervailing duties to be imposed on Chinese goods, making them more expensive for U.S. consumers to buy.
Of course, in principle there would be nothing to stop the Chinese’s own version of the Department of Commerce from defining the depreciating dollar as a subsidy under WTO rules, increasing the cost of U.S. goods overseas. Put another way, the U.S. can devalue its currency all it wants to boost exports — other nations are following suit, and the only impacts will not be on restoring the trade deficit or creating new jobs here, but on increasing inflation and the cost of living for average Americans.
Conversely, the U.S. could tell successful companies that operate abroad to repatriate their earnings here tax-free. And keep it that way. The only way to restore global imbalances is to create an attractive environment to move capital back into America and to produce things here.
The other part of that necessarily is to rein in regulatory burdens, high labor costs, land use restrictions, and environmental regulations that make it cost-prohibitive to invest here. If these constraints are not removed from the economy, the flight of capital overseas will continue. The U.S. needs to lower the cost of doing business here.
Congress limited the foreign income tax credit under the bogus justification that it would make U.S. multinational corporations pay their “fair share” of taxes. Instead, that money is staying overseas, creating jobs and investment there — as was predicted by critics. This is economic suicide. U.S. companies that operate overseas account for nearly half of all American exports, and employ 22 million Americans. Why is Congress encouraging them to shift more operations overseas?
Critical investment capital is being diverted abroad that could instead be devoted here at a time when the weak recovery is slowing down and unemployment remains high. The tax should be completely eliminated, and companies incentivized to use foreign profits to enhance the nation’s productive capacity: to build new factories here in the U.S., invest in research and development here, and create jobs here.
Democrats hurting business, economy
Democrats talk a good game about small business, but actions speak louder than words. Obama and the Democrats are pushing a tax increase that would hit 50 percent of small enterprise income and their massive health-care law saddles business with a flood of tax-filing paperwork for expenditures as low as $601.
Such government meddling in the economy and the threat of more have injected so much uncertainty into economic planning that businesses small and large are hesitant to invest until they get a clearer picture of the tax and regulatory environment. Democratic policies haven't reduced unemployment. Their stimulus did more to protect government jobs than lay the foundation for robust private-sector job creation.
It's no wonder that an alarmed business community is pushing back this election cycle, funneling campaign contributions to candidates and independent groups rallying around a pro-growth and jobs-creation agenda.
The White House response has been again to demonize its opponents. Obama accused the U.S. Chamber of Commerce of using foreign money to fund campaign activities -- a criminal act. The basis for this accusation? An unsubstantiated allegation on a left-wing blog. Recall how Democrats lambasted Republicans for taking their lead from Rush Limbaugh? Well, here's the president of the United States passing along an outrageous, unfounded bit of Internet character assassination.
An independent watchdog group, FactCheck.org, said there was "no evidence" backing this charge, as did several major media outlets not known for Republican leanings, such as the New York Times.
When challenged about the weakness of the accusation on the CBS program "Face the Nation," presidential adviser David Axelrod said, "Well, do you have any evidence it's not true?" In other words, the chamber is guilty of a crime until proved innocent. Thank you for your lesson on American civics, Mr. Axelrod. As the FactCheck organization notes, others such as the extreme left-wing group MoveOn.org have followed Axelrod's unscrupulous tactic.
The fact is that liberal and conservative, Democratic and Republican groups take money under rules that don't require them to reveal donors. Some, like the chamber and the big unions, do collect contributions from foreign sources but don't use them for U.S. electioneering.
The Democrats are raising this red herring in a desperate attempt to distract the voters from their failed economic policies, the 9.6 percent unemployment rate, slowing GDP growth and the vastly unpopular ObamaCare.
Liberals dislike constitutional government
Congressman Jim McGovern (D-Mass.) was being pressed in a live TV debate, so he may be excused for blurting out the truth. Here’s a portion of what very liberal Mr. McGovern said:
"We have a lousy Supreme Court decision [in the Citizens United case] that has opened the floodgates, and so we have to deal within the realm of constitutionality. And a lot of the campaign finance bills that we have passed have been declared unconstitutional by the Supreme Court. I think the Constitution is wrong. I don’t think that money is the same thing as human beings."
What a stunning statement! There are several things to consider in this argument. For us as constitutional conservatives, it’s entirely acceptable to disagree with the U.S. Supreme Court. I say every day that Roe v. Wade was a terrible decision and should be corrected. The Kelo ruling set a dangerous precedent.
Congressman McGovern doesn’t take issue with the Supreme Court, however, he says the Constitution itself is wrong. Did Mr. McGovern take an oath to support the U.S. Constitution? Does he consider himself bound by his oath?
Sure, you can responsibly disagree with portions of the Constitution. Ronald Reagan, for example, disagreed with the two-term limit for President. He thought the Twenty-second Amendment had been a mistake. But Reagan dutifully left office after two terms. Reagan would have supported an amendment to repeal the Twenty-second Amendment, but as long as it was in the Constitution, he felt bound to respect it.
In Congressman McGovern’s case, however, we see why liberals believe in a “living Constitution.” The living Constitution idea was characterized by Justice Scalia as a Magic Slate. You can write on it, get the interpretation you want, then lift up the plastic screen, and re-write your constitution, according to the passions of the moment.
I think Mr. McGovern is wrong in his analysis of the Citizens United ruling. The Supreme Court did not say that money was more important, or even the same thing, as human beings. It said nothing like that. What the Court did say is that you don’t lose your First Amendment rights because you express your ideas through a corporation, a union, or a non-profit organization.
In striking down major portions of the McCain-Feingold Act, the Supreme Court ruled that government cannot stop pro-life groups, for example, from highlighting the records of politicians like Jim McGovern before an election. By preventing pro-life citizens from drawing voters’ attention to how their elected representatives actually vote, this unwise and unconstitutional measure denied citizens their rights to communicate about political matters. That’s one of the main reasons for the First Amendment’s protection of free speech.
Now that he mentions it, does Jim McGovern really think “money is [not] the same as human beings?” If so, maybe he’ll join Congressman Mike Pence’s (R-Ind.) drive to de-fund Planned Parenthood. That outfit gets billions in taxpayer funds and it kills 350,000 unborn children—undeniably human beings—every year.
It would be great to welcome Jim McGovern to the ranks of those of us who believe human lives are more important than money. I’m not cynical, but I must admit I have doubts that Mr. McGovern, should he win re-election next month, will put his fine words into practice when it comes to unborn children.
Now, we can see why “constitutional conservatism” is important. Without a firm reliance on the Constitution as our anchor, the entire ship of state is adrift. Under the current administration and the current Congress, our ship of state is headed for the rocks.
Obama’s Radical Past
And his connection to socialism isn’t all ancient history, either
On the afternoon of April 1, 1983, Barack Obama, then a senior at Columbia University, made his way into the Great Hall of Manhattan’s Cooper Union to attend a “Socialist Scholars Conference.” There Obama discovered his vocation as a community organizer, as well as a political program to guide him throughout his life.
The conference itself was not a secret, but it held a secret, for it was there that a demoralized and frustrated socialist movement largely set aside strategies of nationalization and turned increasingly to local organizing as a way around the Reagan presidency — and its own spotty reputation. In the early 1980s, America’s socialists discovered what Saul Alinsky had always known: “Community organizing” is a euphemism behind which advocates of a radical vision of America could advance their cause without the bothersome label “socialist” drawing adverse attention to their efforts.
A loose accusation of his being a socialist has trailed Obama for years, but without real evidence that he saw himself as part of this radical tradition. But the evidence exists, if not in plain sight then in the archives — for example, the archived files of the Democratic Socialists of America (DSA), which include Obama’s name on a conference registration list. That, along with some misleading admissions in the president’s memoir, Dreams from My Father, makes it clear that Obama attended the 1983 and 1984 Socialist Scholars conferences, and quite possibly the 1985 conclave as well. A detailed account of these conferences (along with many other events from Obama’s radical past) and the evidence for Obama’s attendance at them can be found in my new book, Radical-in-Chief: Barack Obama and the Untold Story of American Socialism.
The 1983 Cooper Union Conference, billed as a tribute to Marx, was precisely when Obama discovered his vocation for community organizing. Obama’s account of his turn to community organizing doesn’t add up. He portrays it as a mere impulse based on little actual knowledge. But that impulse saw Obama through two years of failed job searches. Clearly he had a deeper motivation. The evidence suggests he found it at the Socialist Scholars conferences, where he encountered the entrancing double idea that America could be transformed by a kind of undercover socialism, and that African Americans would be the key figures in advancing community organizing.
The 1983 conference took place in the shadow of Harold Washington’s first race for mayor of Chicago. Washington was not only Obama’s political idol, he was the darling of America’s socialists in the mid-1980s. Washington assembled a “rainbow” coalition of blacks, Hispanics, and left-leaning whites to overturn the power of Chicago’s centrist Democratic machine. Washington worked eagerly and openly with Chicago’s small but influential contingent of socialists, many of whom brought the community organizations and labor unions they led onto the Washington bandwagon.
America’s socialists saw the Harold Washington campaign as a model for their ultimate goal of pushing the Democrats to the left by polarizing the country along class lines. This socialist “realignment” strategy envisioned driving business interests out of a newly radicalized Democratic party. The loss was to be more than made up for through a newly energized coalition of poor and minority voters, led by minority politicians on the model of Harold Washington. The new coalitions would draw on the open or quiet direction of socialist community organizers, from whose ranks new Harold Washingtons would emerge. Groups like ACORN and Project Vote would swell the Democrats with poor and minority voters and, with the country divided by class, socialism would emerge as the natural ideology of the have-nots.
Figures pushing this broader strategy at the 1983 Socialist Scholars Conference included ACORN adviser Frances Fox Piven and organizing theorist Peter Dreier, now a professor at Occidental College and an adviser to Obama’s 2008 presidential campaign. That is to say, Obama’s connection to socialist ideologues didn’t end with his recruitment into the ranks of community organizers. It began there and blossomed into a quarter century of intricate relationships with both on-the-record and in-all-but-name socialists.
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)