Hey, whatever happened to Obama’s “pivot to job creation?”
For the past three years, President Obama has announced numerous “pivots” to job creation, in which he declared jobs were now his “top priority.” He was pivoting often enough to put a ballerina to shame. A new “pivot” was announced after every burst of bad economic news.
So… does anyone know when this “pivot” is actually going to happen? Because job creation has completely vanished from the Obama radar screen. All he cares about right now is tax increases, and one of the tax hikes he demands is the deadliest stone-cold job-killer since ObamaCare: capital gains taxes. We already have some of the highest in the world, but Obama wants to jack them up even more.
It doesn’t require a lot of economic acumen to understand that taxing savings and investment is bad news for job growth. The “fiscal cliff” nobody in Washington seems to be talking about right now is the impending drop in GDP growth. As bad as the Obama economy has been, the third quarter of 2012 is as good as it’s going to get for a while. The fourth quarter is projected to take us to the edge of outright recession; even if we avoid it, we’re stuck around 2 percent growth for the foreseeable future. We’ve swallowed Obama’s weak “New Normal” so thorougly that we throw a big party when we hit 2.7 percent, even though that’s still half a point below the average long-term American growth rate.
Obama, of course, will talk about “fixing” this with more “stimulus,” but we know that doesn’t work. We watched Obama blow almost a trillion dollars on “stimulus” without visible effect. He’s not going to get another trillion to play with.
I’ve never heard Obama give a speech where he demanded less than $160 billion in new spending, but suddenly the $160 billion per year he proposes to take in through tax increases are the 160,000,000,000 most important dollars in Washington. If opponents of ObamaCare had said, “We can’t pass this bill because it will cost $160 billion more per year than its projections!” Obama and the Democrats would have laughed out loud. (And, as it turns out, those opponents would have been dramatically under-selling the cost overruns of ObamaCare.) But suddenly this $160 billion in annual tax increases is the stone upon which the future of the Republic will break? What arrant nonsense. It’s not even ten percent of Obama’s annual deficits. Whynotpivot to job growth instead?
And why not think big? Jim Pethokoukis of the American Enterprise Institute has some ideas, including the “Fair Tax” concept of replacing income taxes with a national sales tax. If Obama was really serious about deficit reductionandjob growth, that’s the kind of solution he’d be looking for. Even one more percent of sustained annual GDP growth would clean up a big chunk of his deficits; combined with rational spending cuts, we could produce a surplus and start paying down the national debt. And a bonanza of new jobs would erupt along the way. We want to stimulate investment and savings, right? What better way than to reduce the tax rate upon them to zero?
But if that’s too much strong medicine, Pethokoukis has some other ideas:
One way we deal with the anti-savings bias of the income tax is by the reduced tax rate on dividends and capital gains. It’s not as efficient as with a consumption tax, but better than nothing. Since switching to a progressive consumption is not on the near horizon, we should avoid raising the tax rates on dividends and capital gains as President Obama wishes to do. Also consider that investment income is already double taxed, first at the corporate level and then at the household level.
The combined U.S. rates on capital income are already among the highest in the world, and that’s before increasing the tax rate on capital gains by 60% and tripling the dividend rate, as Obama desires. That is just bad policy. As liberal economics blogger Matthew Yglesias, “This is an issue where the conservative position is in line with what most experts think is the right course, and Democrats are outside the mainstream.”
At the very least, we should leave investment tax rates where they are. Even better, we should take a small step toward a consumption tax by reducing these rates the longer an investment is held. Clayton Christensen, a business professor at Harvard University, recommends a zero rate after five years.
Growth, growth, growth!
But “growth, growth, growth” is as far from what Obama wants as anyone could get. So tell me: when did the last “pivot to job creation” end, and why should anyone take his next one as anything but a grim joke?