The Magazine

Know-Nothing-in-Chief

There's no evidence Obama has even a sketchy grasp of economics.

Aug 3, 2009, Vol. 14, No. 43 • By FRED BARNES
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It's true that government can create jobs by funding infrastructure and other projects. But these are temporary jobs, and as we've been reminded again this year, it takes many months for government to get its act together and actually start hiring. The stimulus is nearly six months old and we're still waiting.

Nor does Obama understand the economics of business. Our corporate tax rate of 35 percent is the second highest among the major economic democracies. To avoid paying it, companies don't repatriate their overseas profits. They do this to be competitive in the global economy. Slashing the 35 percent rate would allow them to bring profits home and remain competitive abroad. This solution isn't on Obama's radar.

On the contrary, Obama has proudly proclaimed an economically counterproductive approach to overseas profits. In his address to Congress in February, he announced: "We will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas." Profits earned abroad would be taxed at 35 percent.

This makes no economic sense. Untaxed foreign profits allow companies to keep many jobs at home. Taxing those profits weakens global competitiveness. And the beneficiaries would be foreign firms that replace American companies and reap the profits Obama is eager to tax. The Obama policy means the profits go away and tax revenues vanish. Does Obama understand this? There's no evidence he does.

Listen to Obama talk about making "clean energy the profitable kind of energy" and you reach the same conclusion: When it comes to economics, he doesn't get it. His "cap and trade" policy would limit carbon emissions, drive up the costs of gasoline, electricity, and natural gas, and stifle the economy. Only then would green energy become profitable (maybe) and only so long as it continued to receive a massive government subsidy. You can't get much more uneconomic than that.

But maybe Obama can. He wants to eliminate many deductions for upper middle class and wealthy taxpayers. He's eager to spur the growth of unions, though success here is likely to slow the rate of growth and increase the rate of unemployment. He wants government to intervene more aggressively in the economy, a reliable job killer. He's asked for authority to seize any financial institution deemed (by his administration) a "systemic risk" to the economy. He thinks government can teach the private sector lessons in efficiency. That would be an historic first. He believes his budget, which triples the national debt, "lays the foundation for a secure and lasting prosperity."

Whew! And this is just what Obama has proposed in the first six months of his presidency. Obamanomics pays lip service to a free market economy. But Obama hasn't a clue what makes it work. T

Fred Barnes is executive editor of THE WEEKLY STANDARD.