House Speaker John Boehner is playing a heroic role right now. In his efforts to prevent the Bush tax cuts from expiring, Boehner is aggressively taking on President Obama’s leadership ineptitude on the economy.
In essence, Boehner is pushing a Republican policy to wrap up a debt-limitation bill and extend the Bush tax cuts in one fell swoop before the election — and before all the last-minute, crisis-oriented political machinations that would come in a lame-duck Congress, threatening another credit downgrade and leading to a business-hiring freeze and plunging stock market, all of which happened last year.
While President Obama is out on the campaign trail talking about how bad things were four years ago, and how we have to go “forward” to his second term to see just how great things are going to be in the next four years, the biggest problem he’s got is the here and now.
Real gross domestic product in the second quarter stalled at 2.2 percent. There were a paltry 115,000 new jobs in April. The labor force shrank by 342,000 for the month, and the 63.6 percent labor-force participation rate is now the lowest since 1981. There are roughly 23 million people classified as either unemployed, underemployed or no longer looking. And median household income has dropped by $4,300 during Obama’s time in office. This all adds up to a tough indictment of the administration’s economic policies.
Is Tim Geithner the most politically partisan treasury secretary in history? Certainly sounds like it these days. As the government’s chief financial officer, he’s spending a lot of time firing campaign barbs at various Republicans and their policies.
Geithner has blasted Mitt Romney by name on several occasions. He frequently attacks Rep. Paul Ryan and the GOP budget. And he recently fired a broadside at top Romney economist Glenn Hubbard, who is presently dean of the Columbia Business School.
Wall Street headlines are full of fears of a springtime stall for the already subpar economic recovery. And if that weren’t bad enough for Obama’s re-election chances, a spate of new polls show Mitt Romney’s economic-approval ratings are far outdistancing the president’s.
Even while the headline surveys basically show an Obama-Romney tossup, it will be very difficult for Obama to pull out a victory this fall. Traditionally, incumbents who poll below 50 percent are in trouble. And with Obama consistently in the mid-40s, he has a tough uphill climb ahead.
In President Obama’s latest class-war, tax-the-rich gambit, he has stooped to a new low with misleading and out-of-context quotes from Ronald Reagan. Apparently, the president is now trying to use the Gipper for cover while he attacks Mitt Romney with the so-called Buffett Rule.
In an address this past week, Obama cited a couple of Reagan speeches from June 1985, in which the former president quoted a letter from a wealthy executive who grumbled that he paid less in taxes than secretaries or bus drivers.
As Ronald Reagan famously said, “There you go again.”
Of course, Reagan was blaming Jimmy Carter for launching false attacks during a debate. And that line was so effective, it not only helped Reagan win the debate, but a presidential election that would change American history.
But “there you go again” can apply equally to President Obama. Once again this week, the president was out on the campaign trail bashing and oil and gas companies. And he continued to spread major falsehoods about this industry, which I guess is the polite way to put it.
Obama is obsessed with oil and gas. He is a prisoner of the left-wing environmental groups. And really, he’s extending his leftist class-warfare attack from rich people to successful oil and gas producers.
What seems to have Obama especially steamed is the fact that the conventional-energy companies are profitable. Especially the five largest. So he wants to tax them. He then wants to redistribute their income to his favorite green-energy firms. Sound familiar? I don’t know which is more important to the president — the fact that he hates fossil fuel or the fact that he hates success. Or that he wants an energy-entitlement state.
But here’s what I do know, factually.
Oil companies have an effective corporate tax rate well above 40 percent. And they operate within one of the highest-taxed industries in America. According to the Tax Foundation, for more than 25 years, oil and gas companies have sent more tax dollars to Washington and state capitals than they earned in profits. That’s a fact.
Single-handedly, oil and gas companies finance over 10 percent of non-defense discretionary spending within the U.S. budget. According to The Wall Street Journal, ExxonMobil, the world’s largest energy firm, paid out $59 billion in total U.S. taxes over the five years prior to 2010 while earning only $40.5 billion in domestic profits.
And Obama wants to raise taxes on conventional-energy firms by somewhere between $40 billion and $80 billion? Whatever happened to the supply-side principle that if you tax something more, you get less of it?
But with gasoline prices headed towards $5 a gallon, and with oil prices over $100 a barrel, virtually the whole country outside of the White House wants more oil, more retail gas for the pump and more energy supplies everywhere in order to bring prices down. Raising taxes won’t do it.
Make no mistake about it: Fossil fuel is going to drive the American economy for decades to come. Green energy is not.
Obama’s other line of attack is that oil companies shouldn’t get any subsidies. They made too much money for that. Well, I’m against oil subsidies. There’s about $90 billion worth in the federal budget. Better to end them, slash corporate tax rates across the board and let the free market decide energy policy and production.
But on the subject of subsidies, so-called renewable-energy subsidies (think Solyndra) are 49-times greater than fossil-fuel subsidies, according to studies by the Congressional Research Service. And the Congressional Budget Office says renewable green energy received 68 percent of energy-related tax preferences in fiscal year 2011, while fossil fuels got only 15 percent. Additionally, oil, natural gas and coal received 64 cents per megawatt hour in subsidies, while wind power alone received $56.29 per megawatt hour. That’s nearly 100-times what fossil fuels got.
By the way, the so-called subsidies that Obama is talking about are really depreciation write-offs for investment. Oil companies get a 6 percent deduction from income. Most manufacturing industries get 9 percent. And every company in the economy is eligible for faster investment write-offs.
Frankly, the most pro-growth corporate-tax policy would be 100 percent cash-expensing for new investment, a slashed corporate tax rate, and no more subsidies, preferences and carve-outs. That would be an unbelievable job-creator.
But President Obama is too busy spewing falsehoods to support his ideological agenda than to take account of the facts. And while he’s at it, one of the greatest, pro-growth revolutions ever is taking place right under his nose. It’s the oil and gas shale miracle, which if left unfettered will turn America and Canada into an energy-independent New Middle East inside of 10 years.
In fact, the collapse of natural-gas prices brought on by this revolution could become one of the biggest tax cuts for the economy in history, making all our industries vastly more competitive, revolutionizing transportation and providing more consumer real income at home.
Obama should quit the demagoguery, stop bashing oil and gas, stop taxing success and let our ingenious, creative, free-enterprise private economy spur America to a new generation of prosperity.
The late William F. Buckley Jr. naturally put it best when he said: “The wisest choice would be the one who would win. No sense running Mona Lisa in a beauty contest. I’d be for the most right, viable candidate who could win.”
Bill Buckley’s law applies to Mitt Romney today. And it’s worth noting Rush Limbaugh’s recent update to the dictum. After Romney’s terrific Illinois victory speech Tuesday, Rush said flatly, “A conservative alternative to Romney is Romney.”
No matter how much President Obama protests, the simple fact is that he continues to oppose and mock and disparage oil and gas drilling. He is a prisoner of the environmental left, and he remains on the wrong side of energy history.
And that’s exactly why he has a 59 percent negative rating on the economy, according to a recent poll, even though jobs and other indicators have actually picked up. It’s about $4 or higher gas at the pump. Polls overwhelmingly show that Americans want drilling in ANWR and offshore, and that they want hydraulic fracturing of shale for oil and gas. They also overwhelmingly want the Keystone Pipeline (by roughly 70 percent). And they believe the government can act quickly to lower gas prices in the short run.
I didn’t want to let the latest cockamamie Fed idea for “sterilized” bond buying pass without a comment. A Wall Street Journal story explained that somehow the Fed will buy more long-term bonds, print new money and then borrow the money back so it doesn’t cause inflation. It’s all a lot of hooey. Typical Fed tinkering. It can’t seem to help itself. The dollar has already fallen about 1 percent since this story broke. Gold has jumped.
If you buy into the Fed’s argument, it will inject cash in return for new bond purchases. Then it’s going to take the cash out by selling Treasury bills to the very same dealers who bought the bonds. These are called reverse repos. Or, the Fed will somehow force the banks to put the original new cash into bank accounts called “term deposits.”
Mitt Romney snatched victory from the jaws of defeat in Michigan by unveiling a pro-growth, 20 percent tax-cut plan and by resetting his limited-government spending cuts and entitlement reforms. In other words, he delivered an economic-growth package. It served him well.
It may not have been the only factor in his victory last week, but it put him squarely in the voter zeitgeist. And it may be apocryphal on Super Tuesday in Ohio, where he has come back to dead even after being down double digits.
President Obama fought back against rising oil and retail gas prices in a speech in Florida on Thursday. But it was a curious speech. He started out by mocking Republicans, stating that GOP candidates are licking their chops as gasoline prices rocket up. He said, “They are already dusting off their three-point plans for $2 gas. I’ll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling.”
Very clever. It’s kind of what Newt Gingrich said in this week’s Arizona debate.
If you shake out the Obama budget in terms of bold headlines, it’s really a class-warfare, tax-the-rich budget. Layer upon layer of tax hikes are piled on successful investors, small-business owners and corporations.
The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that’s not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed.
Out on the campaign trail, Fed head Ben Bernanke is an unpopular guy.
Mitt Romney and Newt Gingrich have both said they would replace Bernanke, not reappoint him. Rep. Ron Paul would swap the whole Federal Reserve monetary system for a gold-linked dollar, making the yellow metal legal tender. And it was Gov. Rick Perry of Texas, before he dropped out of the race, who said more quantitative easing by the Fed would be “almost treasonous.”
You would think that with one of the weakest economic recoveries on record, President Barack Obama would be searching desperately for ways to promote economic growth. It is, after all, an election year. Most pundits and pollsters agree that it’s the economy, stupid.
But instead, Obama used his State of the Union speech to rail on about fairness, inequality and redistribution. The Obama strategy is simple: Tax the rich, because they don’t pay enough.
Let me build on Charles Krauthammer’s great Friday column, “The GOP’s Suicide March.” Krauthammer argues that just as President Obama’s class-warfare, soak-the-rich mantra started lagging in the polls, some Republicans on the campaign trail started making the case that Mitt Romney’s Bain Capital was involved in nothing more than vulture capitalism, looting companies and destroying jobs. Keeping class envy alive.
I’m not going to name names, because everybody knows who these Republicans are. Instead, I want to go positive and commend Romney himself. Romney did his best in the second South Carolina debate to fight for free-market capitalism and Adam Smith, and against the spread of Obama-style crony capitalism and class envy.
There’s a very troubled company out there called U.S. Government Inc. It’s teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.
A quick look at the income statement of this troubled firm tells the story. Just in the past year (FY 2011), the firm spent $3.7 trillion, but took in only $2.2 trillion in sales revenues. Hence its deficit came to $1.5 trillion.
While so much attention has been turned to Newt Gingrich’s catastrophically mistaken attack on Mitt Romney’s Bain Capital, free-market capitalism, investment and profits, a potentially much more significant development occurred in the New Hampshire debate Saturday night. For the first time, Romney embraced a much bolder tax-reform plan.
Under pressure from a number of supply-side conservatives (including me, and most especially the editorial-page folks at The Wall Street Journal), Romney appears to be listening. Here’s his money quote from the debate:
Message to my fellow conservatives: Please don’t blame the mainstream media for the improvement in jobs, unemployment and economic growth. Reporters are not making this up. The economy is better. It’s going to give President Obama a leg up on the election. GOP beware, and come to your senses.
Take Friday’s jobs report from the Bureau of Labor Statistics. Non-farm payrolls gained 200,000, and the unemployment rate slipped to 8.5 percent from 8.7 percent. It may well be that a seasonal quirk added 42,000 messengers and couriers to the totals, but that will be lost in the headline reporting. It will be given back next month. It’s inconsequential to the overall story. Likewise, a normal labor participation rate would yield much higher unemployment. But that’s academic.
When you think of Republican Rep. Paul Ryan, terms like earnest, serious and important come to mind. So does the term old-fashioned. Ryan comes from an old-fashioned place, the blue-collar town of Janesville, Wis. He cherishes the old-fashioned values of a faithful family man. He even looks old-fashioned, with his white shirts and striped ties. And he uses old-fashioned argument skills, persuasively weaving big-picture themes with the numbers that back them up.
And Ryan has old-fashioned goals, too, like saving America from fiscal bankruptcy, economic stagnation and a European-style entitlement state.
The payroll-tax-cut debate is not really about the payroll tax, which is a very weak-kneed economic stimulant and a lackluster job creator because of its temporary nature. Without permanent incentives at lower tax rates, these rebates don’t do anything for growth and jobs.
Instead, the key to understanding the payroll-tax debate is to grasp President Barack Obama’s leftist vision of taxing successful earners (the millionaire surtax) and his obsession with clean energy at the expense of fossil fuels. These are ideological positions. They support the Obama vision of class warfare and his attachment to radical environmentalism.
And the key to understanding this state of affairs is the disposition of the TransCanada Keystone XL pipeline, which Republicans cleverly threw into the payroll-tax debate as the only real job creator.
Say what you will about former Speaker Newt Gingrich. His philosophy, his policy proposals, his track record, his campaign and all the rest. But the one thing you have to acknowledge about Gingrich is that he’s a sizzler. He has a way with words. And he’s as good a communicator as anyone in modern politics.
In my CNBC interview with Gingrich this week, he slammed President Obama’s tax-the-rich, class-warfare attack on banks and businesspeople. He hammered Obama, calling him a hard-left radical who is opposed to free enterprise, capitalism and “virtually everything which made America great.”
It’s often said that help comes to those who help themselves. But Europe can’t seem to help itself. So on Wednesday, the U.S. Fed came to the rescue. And that rescue triggered a global stock market rally, including a near 500-point gain in the United States.
Basically, the Fed is making it cheaper for Europe to borrow dollars. And this dollar backstop symbolically shows that the Fed, the European Central Bank and other big central banks are not going to permit a 2008-type credit freeze and financial meltdown.
With a great feeling of loss and sadness, I want to join with so many others to mourn the passing of Ted Forstmann, the brilliant financier, entrepreneur and free-market capitalist.
A Wall Street Journal editorial from Paul Gigot and a column by Charlie Gasparino in the New York Post chronicle Ted’s great achievements. It was Ted who invented the leveraged buyout, and it was Ted who walked away from the bubble of overleveraged junk bonds. Ted was a major philanthropist, and an education reformer, too.
It would be a great tragedy if a super tax hike came out of a supercommittee compromise deal. It would do great harm to the economy — just as much harm as President Obama’s various tax-hike threats. And on the Republican side, a super tax hike would irreparably split the GOP.
OK. Here’s the good news. In a CNBC interview this week, I asked supercommittee co-chair Jeb Hensarling about an idea from the Democrats to raise taxes by $600 billion to $800 billion. About $300 billion of that might be upfront, with $500 billion later from some tax-reform overhaul. This would be an unmitigated economic disaster.
There were three winners in the CNBC debate: Herman Cain, Mitt Romney and Newt Gingrich. Gov. Rick Perry was the obvious loser because of his memory lapse.
The guy with the toughest job on Wednesday night was Cain, who has been hammered by sexual-harassment charges. He needed a strong performance to put him back on message with his 9-9-9 tax plan and pro-business, free-enterprise views. I give him first prize, simply because he performed so well. He had the most to gain and the most to lose. He gained.
Despite some modest improvements in the jobs picture with the release of Friday’s Labor Department report, I would guard against any irrational overexuberance that problems with employment or the economy are being solved.
A smaller-than-expected 80,000 gain in nonfarm payrolls was bolstered by upward revisions in the prior two months, amounting to 102,000 additional jobs. So over the past three months the establishment survey has averaged 114,000. It’s really nothing to write home about.
The world economy has once again dodged Armageddon. The European Union finally forged a Greek bond deal, and a rescue fund big enough to ring-fence banks and sovereign debt, in order to avoid a catastrophic, Lehman-like contagion event. At the same time, the U.S. economy moved away from the threat of recession with a third-quarter real gross domestic product report of 2.5 percent. In response, stocks are soaring. We’ll live to see another day.
First, the American economy. Led by surging business investment of highly profitable corporations and a modest gain in consumer spending, the new GDP report says “no” to a double-dip recession. As the economy stalled out in the first half of the year — with 0.4 percent GDP growth in the winter quarter, 1.3 percent growth in the spring, and August data showing zero jobs and retail sales — I warned nearly two months ago that we were on the front end of recession. Turns out I was too pessimistic.
The latest Gallup poll pegs President Obama’s approval at a new low of 41 percent. That adds to the thought that the winner of the GOP presidential-primary sweepstakes is going to be the next president.
And inside that Republican contest, the policy pendulum is swinging toward pro-growth, flat-tax reform. A new agenda. With Herman Cain’s 9-9-9 plan and the announcement of a Steve Forbes-type flat tax from Gov. Rick Perry, the GOP flat-tax-reform competition is dominating the headline news.
Herman Cain is the only GOP presidential candidate who wants to kill the tax code. That’s right. Put a knife in it. Junk the entire system. And people are cheering as he rises in the polls in his quest for the nomination.
Cain’s 9-9-9 plan is not perfect. But then again, the good should never be the enemy of the perfect.
Rick May 21, 9:24 PM on Was Saving GM Worker’s Job Fair?If he hadn't bailed them out, our country's unemployment insurance system would have been overloaded...
