Previewing tonight’s speech this past weekend, Mr. Obama said: “We can go in two directions. One is towards less opportunity and less fairness. Or we can fight for…building an economy that works for everyone, not just a wealthy few.”
The President must not understand that an economy based on free-enterprise with limited government involvement will, in fact, work for and benefit more than just the wealthy. His administration’s idea of an economy that works involves imposing heavy-handed government regulations and threatening tax increases at every turn. Right now, the country is experiencing the tremendous uncertainty that such policies breed. It is the bad kind of uncertainty, the kind that keeps employers from hiring and entrepreneurs from launching new businesses. It keeps the economy stuck in slow, instead of revving it up. In place of more regulation, higher taxes, and increased government spending, the President should propose to take the country in a new direction in tonight’s speech. A direction that leads to less onerous government regulation, fundamental tax reform, and a government that spends taxpayer dollars responsibly.
More Job Training Programs on Top of All the Other Redundant and Ineffective Programs – David B. Muhlhausen, Ph.D.
Tonight, President Obama called for the federal government to engage in new job training and employment initiatives, especially for the hard to employ.
Before Congress signs off on any new initiatives, we must recognize that President Obama wants to add several new programs on top of the 47 job-training programs already operated by the federal government. Further complicating the matter, the U.S. Government Accountability Office has concluded that there is little evidence that these programs are effective.
When federal job training programs have been evaluated using random assignment to job training and control groups, these scientifically rigorous evaluations overwhelmingly find that these programs are ineffective. For example, Job Corps, the federal government’s flagship program for hard-to-employ youth, has been found to beineffective on several measures:
Compared to non-participants, Job Corps participants were less likely to earn a high school diploma (7.5 percent versus 5.3 percent);
Compared to non-participants, Job Corps participants were no more likely to attend or complete college;
Four years after participating in the evaluation, the average weekly earnings of Job Corps participants was only $22 more than the average weekly earnings of the control group; and
Employed Job Corps participants earned $0.22 more in hourly wages compared to employed control group members.
Instead of adding new programs to an already bloated job training system, the President and Congress should stop wasting taxpayer dollars by terminating these programs.
Obama’s Policies Have Exacerbated Increases in College Costs – Lindsey Burke
President Obama is right to call on colleges to work to drive down college costs. Unfortunately his administration’s move last year to forgive student loan debt after 20 years was reckless, and won’t help achieve that goal.
Taxpayers who worked hard to pay off their own college debt should not be penalized by having to pay off the loans of those who, irresponsibly, took out more debt than they can handle paying. Moreover, the three-quarters of American taxpayers who did not graduate from college should not be penalized by having to finance the college student who took out $100,000 in loans to pay for a degree of questionable value.
Immigration Nowhere - James Carafano
No one expected real progress from Washington in dealing with our broken borders and deeply flawed immigration system during an election year. Tonight, Obama did not disappoint. “The opponents of action are out of excuses. We should be working on comprehensive immigration reform right now.” In Washington-speak, “comprehensive reform” is just another way of saying “amnesty.” Washington tried the amnesty approach in 1986. At the time there were about 3 million living unlawfully in the United States. After granting amnesty, the number grew to three to four times that. The lesson learned was that amnesties just encourage more illegal immigration. That’s why the American people and Congress rejected amnesty when the Bush administration proposed it—and the Congress even refused to take the proposal up for a vote when Obama pushed for it—and his party controlled both houses of Congress.
Fixing the problems requires real solutions—working with Mexico to address that country’s challenges in security, economic freedom, and civil society; creating effective temporary worker programs that get employers the employees they need when they them to grow their businesses and grow jobs; common sense border security; enforcing immigration and workplace enforcement laws; and fixing the flaws in our legitimate immigration programs. None of these solutions require amnesty first. In throwing out bumper stickers rather than offering a real vision for keeping America a vibrant nation of immigrants that respects both our laws and our sovereignty—the president proved than when he bemoaned that election year politics are killing reform he is the worst offender.
Source of Slow Recovery: Obama and His Policies – J.D. Foster
Once again we are reminded — President Obama inherited an economy in recession. Right. But the recession ended in June of 2009. This fact leads to three important conclusions.
First, it means the recession’s end occurred independent the big stimulus bill Obama signed in the previous February. Three months of a gradually implemented stimulus is insufficient time to have a noticeable effect.
Second, thirty one months have passed since recession’s end, which leads to, third, an economy that is muddling along at around 2 percent growth should by this time be expanding nearly twice that rate.
No, special circumstances cannot explain the anemic recovery. Yes, the housing sector is still struggling. Yes, the Japanese tsunami disrupted our economy and theirs. But the real reason for the weak recovery is the debilitating uncertainty permeating the economy, much of it emanating from the White House. This uncertainty is captured well in the Economic Policy Uncertainty Index.
As its name implies, the Index reflects the extent of uncertainty about federal economic policy and its consequences. The Index value today of 277 is almost twice what it averaged in the past decade. That means there’s a lot of uncertainty dragging on the economy.
The prescription for a stronger economy is simple – do less harm, and so cut the policy uncertainty: don’t raise or threaten to raise taxes; call time out on new regulations; cut spending; and begin to turn unaffordable, inadequate entitlement programs into affordable, reliable, enduring systems.
Insourcing Agenda Displays Misunderstanding of Global Economy – Curtis Dubay
Rather than fix the well-known problems with the corporate tax system, President Obama’s would force U.S. businesses to pay tax on their foreign income when they earn it rather than when they return the money to the U.S. That way, these businesses are subject to the highest-in-the-world U.S. corporate tax rate before they would be under the current deferral system.
The wrongheaded thinking that led to this proposal holds that as long as businesses pay the U.S. tax rate on all their income, foreign and domestic, they have less reason to locate jobs overseas. However, this is just another form of protectionism, because it purports to protect U.S. jobs from the foreign competition.
President Obama is wrong when he assumes that a U.S. company expands overseas it does so at the expense of our economy. When a U.S. company moves into a foreign market to meet new demand, it creates jobs not only in the new market but in the United States, as well.
President Obama’s insourcing policies would make it more difficult for U.S. businesses to chase promising opportunities around the globe and slow job growth here at home in the process. Instead of wrapping protectionist policies in the tax code, the President should propose to reform the entire tax code to make it more competitive internationally. That would mean a lower rate for all businesses and taxing them only on the income they earn here at home.
Tax Reform? It’s Needed, but There’s A Better Way to Go – Emily Goff
President Obama says he is ready and willing to embark on tax reform. This is a welcome statement, as our current tax system is ripe for overhaul. However, instead of piecemeal approaches or solutions that give preferences to one industry or company over another, the President should look to the fundamental reforms that the New Flat Tax, as part of The Heritage Foundation’s Saving the American Dream, would bring.
On Energy, the Two Words Obama Didn’t Say, Say the Most – Nick Loris
President Obama omitted two words from his State of the Union speech, but there’s two words that speak volumes about the president’s direction for America’s energy policy. Keystone and Solyndra.
Oil and Gas Production
With respect to oil and gas production, President Obama ignores the bad administrative decisions and takes credit where credit’s not due. He chose not to mention his rejection of the Keystone XL pipeline that would have created jobs immediately and brought much needed oil from Canada to Gulf refineries – all with minimal environmental risk. Despite broad support for the pipeline, the President catered to special interests and rejected the permit.
President Obama did, however, recognize that we need more domestic oil and gas drilling is a positive sign, but recognition does not create jobs. Yes, oil and gas production is the U.S. is up but only as a result of increased production on private lands in North Dakota, Texas and Alaska. On federal lands and offshore, the story is much grimmer. Yes, imports for oil are down but because demand is weaker in this recessionary environment.
It wouldn’t be a State of the Union without President Obama saying that we need to invest in clean energy. But the word “invest” in this sense means borrow and spend and this free lunch thinking is no way to grow our economy. The fundamental problem is that these taxpayer-funded programs do not create jobs; it reallocates them. The opportunity cost of government spending is the lost labor and capital extracted from other sectors (ones that do not need government support) of the economy to artificially support the politically preferred sectors of the economy. No evidence exists to suggest that the government has better knowledge to make investment decisions or to commercialize technologies when the private sector chooses to bypass these opportunities. If there is a role for alternative sources in America’s energy portfolio, it should be dictated by price and competition, not government handouts. As evidenced by Solyndra, subsidies lead to companies spending resources lobbying to create a relationship with government officials that will secure cash grants, tax credits or mandates to benefit their business while crowding out others. It’s this cronyism that denigrates Americans’ view of both government and capitalism. The solution is to end subsidies for all energy sources.
What about nuclear energy, Mr. President? -Jack Spencer
The President insists that he wants to build an economy using American energy resources to create American jobs. Nuclear energy might be a good place to start. America would need approximately 50 new plants over the next 30 years just to maintain the percentage of our electricity that is currently produced by nuclear power. Each of these plants requires around 2400 workers to build and then another 700 are required to operate each plant. Then there are all the workers needed to manufacture the plant components, to produce the fuel, and to manage the waste.
The President, at least rhetorically, understands the potential of nuclear energy. It creates jobs and produces the clean, domestic energy that he claims to want. But when it comes to policies to allow an expansion on nuclear energy, this Administration has fallen short in two regards.
First, like with most other energy related policies, his nuclear energy policies consolidate power in Washington and reject the value of the free market. He wants his bureaucrats to pick what technologies go forward and then to decide which projects get financed.
Second, with his decision to abandon the Yucca Mountain project, the President has moved the nation further from a nuclear waste solution than it has been for three decades. By killing Yucca without any back up plan, the President has introduced immense uncertainty into the long-term viability of American nuclear power.
Obama Education End-run Around Congress - Lindsey Burke
President Obama’s call to reward excellent teachers and raise standards sounds great, but his administration has been orchestrating and end-run around Congress, which will ultimately limit the power of states and local leaders to implement policies that will achieve these goals. The president might not like the fact that conservatives in Congress are engaging in a thoughtful process to save states from the bureaucratic nightmare that is No Child Left Behind, but his solution – granting waivers from the White House and imposing his preferred education policy from the White House – will only bind the hands of state leaders down the road by giving more power to the Department of Education.
President Obama is pushing states to adopt national standards and test, putting Washington in control of what is taught in every public school across America. By contrast, conservatives in Congress have offered several proposals, including proposals by the House Education and the Workforce Committee to provide more flexibility from No Child Left Behind to states and local leaders to determine how education dollars are spent. There are also alternatives like the A-PLUS proposal, that would allow states to completely opt-out of No Child Left Behind, and provide genuine relief.
A Clean Energy Standard Would Throttle Economy - Romina Boccia
During last year’s SOTU, the President set a target for a Clean Energy Standard of 80 percent by 2035. This year, the President once again called for a CES, only this time, less ambitiously.
[...] there’s no reason why Congress shouldn’t at least set a clean energy standard that creates a market for innovation.
The issue is that a clean energy standard would throttle economic growth, and that is why Congress has rightly not put one in place. One way of converting existing shares of “dirty energy” into clean energy is by cutting energy from conventional sources. Environmental Protection Agency regulations are already well on their way to cut existing coal capacity by forcing the premature shutdown of older plants with burdensome compliance rules. No matter how many times the President lauds the supposed benefits of clean energy investments and green jobs, the truth remains that government-forced cuts in conventional energy use throttle economic growth and green jobs are a fallacy.
Instead of wasting taxpayer dollars by lavishing subsidies on select renewable energy sources and driving up energy prices by mandating their usage, Congress should reduce artificial barriers to domestic energy production and create a level playing field so that energy providers compete on their merits.
Obama’s Energy Policies Hurt the Poor and Middle Class the Most – Romina Boccia
This SOTU, President Obama called for doubling down on the clean energy industry through energy tax credits and a Clean Energy Standard. The President’s focus on costly and unreliable “clean” energy at the expense of more affordable and reliable energy is cutting deep into Americans’ pocketbooks.
Lower-income households who spent a much larger portion of their income on energy, and senior citizens who have the highest per-capita residential energy consumption, are hurt the most by policies that increase the price of energy. Meanwhile, only the better off are able to place taxpayer subsidized solar panels on their roofs.
Furthermore, despite a failed attempt at passing economically harmful cap and trade legislation, the President’s administration continues to push forward with questionable environmental policies which curb production of one of the most affordable and abundant energy sources in the United States: coal.
An energy policy which increases the availability of reliable and affordable energy is one that works for all Americans.
Once Again Mr. President, Warren Buffett Doesn’t Pay a Lower Tax Rate than His Secretary – Curtis Dubay
As expected, especially her sitting in the audience, President Obama trotted out again the well-worn trope that Warren Buffett pays a lower tax rate that his secretary. The President did so to defend his new version of the“Buffett Rule” proposal that no millionaire pay less than 30 percent of their income in taxes.
The President can claim success on this one even before he ends his speech tonight because the Buffett Rule is already soundly in place. According to the CBO, the top 1% of income earners pay 30 percent of their income in all federal taxes.
The whole idea of the Buffett Rule is based on a fallacy. One that Warren Buffett himself should know better than to propagate. It originated because Warren Buffett claims he pays a much lower tax rate than his secretary. But he earns his income through capital gains from stock he owns in businesses. He pays a 15 percent rate on those gains when he realizes them. But before he enjoys those gains, the businesses that generate them pay the highest-in-the-world 35 percent corporate income tax rate. In reality, Buffett pays 50 percent on the income he earns- far above the rate his secretary pays.
It is unclear exactly how the Buffett Rule would be implemented if it became law. One way could be to raise the tax rate on capital gains to the middle-income rate of 28 percent, or as high as the top income tax rate – 35 percent now and scheduled to rise to 39.6 percent next year. This would be highly damaging to the economy because it would drastically raise the cost of capital causing businesses to buy less. Less capital means fewer jobs and lower wages for American workers of at all income levels.
A policy that is supposed to help the middle class would end up hurting them. Such is the way when Washington plays soak the rich with the tax code. A better approach would be to reform the tax code so it is simpler, fairer, more transparent, and pro-growth along the lines of the Heritage Foundation’s New Flat Tax.
Costly New Regulations -James Gattuso
President Obama tonight made the startling claim that he had ”approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.” This claim is more than a little bit misleading. According to the Government Accountability Office, it is true that fewer total rules were issued during this Administration than during that of George W. Bush. But that counts many administrative actions of no real significance. When you look at major rules – those with $100 million or more in economic impact, a very different picture emerges. Some 189 of these costly rules have been adopted in the past three years, compared to 153 during George Bush’s first three years. That’s a 23 percent increase in red tape. So much for regulatory restraint.
This by the way, isn’t the first time that the Obama Administration has been caught playing with the numbers on regulation. As reported by FactCheck.org last year, Cass Sunstein, the president’s “regulatory czar,” presented a “distorted view” of this president’s regulatory record compared to his predecessor. In fact, the organization’s report concluded (citing research by Heritage among others) the Obama Administration has imposed far more in costs on the country than his precedessor had at the same point in his tenure.
The President also cited efforts to reduce unnecessary regulation, claiming some 500 reforms under his belt. That would be welcome news, if true, but the relief provided by these moves is only a small sliver of the new costs imposed. Virtually none are even considered “major.”
No one wants to abolish all regulation. But, as the president said again tonight, many are unnecessary and too costly. But the president has added to, not reduced, the problem.
Obama’s Policies Must Not Sting the Economy into Lethargy – J.D. Foster
The story goes that a scorpion once needed to cross a river, but had no way across. Along came a fox who was going to swim across and the scorpion asked if he could ride on the fox’s back. The fox said no, because the scorpion would sting him and they’d both die. The scorpion answered that he didn’t want to die, and so the fox was safe. Sufficiently assured, the fox let the scorpion on her back and she began to swim across.
At first, everything went well. But then, as they reached the midpoint of the stream, the scorpion suddenly tensed up and stung the fox on her back, just as she had feared. As she began to black out the fox cried out, “Why did you do that? Now we’re both going to die.” The scorpion sighed, “I know, but a scorpion’s got to do what a scorpion’s got to do”.
In listening to President Obama talk about the need for a stronger economy and more jobs in one breathe, and the need to raise taxes on saving, on investment, on job creators, and others of higher incomes, in his next breathe, one is reminded of the scorpion.
It is a simple and inescapable truth that one does not get more saving, more investment, more new businesses, more entrepreneurship, more economic growth, by taxing these things more. But this simple truth seems to lie outside the permissible realm of the President’s ideology. Fortunately, the economy is better protected against President Obama’s proclivity to sting the economy into sustained lethargy than was the poor fox. The President was largely unsuccessful in 2011 in pushing his job destroying agenda through the Congress, and all indications are he will be no more successful in 2012.
The Success of A Few Not An Excuse for Obama’s Economic Failures - Bill Beach
The President uses the success of a few as excuse for the economic policy failures of his administration. Changes in the distribution of income are due to three well known developments: the recession, failed economic policies of the past eight years, and the aging of the working population. The President has also been badly served by his economists:
If the President’s economists were to account for these three factors, they would find almost no change in the distribution of labor income over the past twenty years.
If these economists would use data from 2008 through 2010 rather than stopping their analysis at 2007, they would find that the hated rich have lost 40 percent of their wealth, thus massively decreasing the differences in income between the bottom and top earners.
Finally, the President’s analyst should remember that population change is still the biggest force in our society. The Baby Boomers (nearly 71 million are still in the labor force) are at their top earning years, which is a major factor why the top 40 percent of the income distribution is wealthier today than 20 years ago.
Obama’s Failed Job Creation Logic – Emily Goff
To justify its job creation proposals, especially in the energy or transportation sectors, the Obama Administration is fond of highlighting individual Americans who were unemployed but now have a job. Tonight the President referenced a worker who once made furniture, was laid off, and then found a job with a wind turbine manufacturer. Keep in mind that the wind energy market, like many other energy markets, is highly subsidized. By the president’s logic, that worker got a job thanks to Washington’s spending, so what is needed is more spending.
It’s convenient to put a camera in front of a few newly-employed persons and then say “job well done, our policies worked”. But unemployment numbers in the aggregate tell another story. The unemployment rate currently stands at 8.5 percent. In December there were 200,000 jobs added, which indeed is encouraging amid the current economic doldrums. However, as The Heritage Foundation’s James Sherk writes, “At that pace, the unemployment rate will not return to normal levels (or 5.2 percent) for four and a half years—not until September 2016.”
It’s time for the President to recognize that the government doesn’t create jobs. The private sector does, and it does it well. Mr. President, help lead in getting Washington out of the way. Let the economy heal and create jobs on its own.
A PR Gesture on Financial Crimes - David John
No one wants financial crimes to go unpunished, but the President’s announced new Financial Crimes Unit is little more than a PR gesture. Almost all of the crimes it will consider ranging from insider trading to fraud to stealing are now crimes and have been for many years. And it is not like the Justice Department has been sitting on its hands since 2008. Late last year, a very high profile insider trader was convicted as have a number of others. Still more trials and indictments are pending. State, local and federal governments have been working together with great success.
The newly announced task force may be worth a few minutes of new TV time, but it is really just doing what hard working professionals have been doing for some time. The implication that it will do even more is an insult to the prosecutors who have been doing the same thing.
Disappointing Housing Hype - David John
One of the disappointing aspects of President Obama’s speech was that the much hyped housing section was little more than a re-warmed proposal from last fall. And that was just a re-working of several earlier failed versions that failed to work. Sadly, this version is unlikely to be any more successful.
While details are lacking, the President promised to allow homeowners to refinance mortgages in a way that would reduce their payments by about $3,000 a year. Earlier, there had been speculation that he would announce a way for homeowners to have the amount of their loan reduced, but after the Federal Housing Finance Agency (FHFA) noted that such a plan would cost taxpayers an additional $100 billion in subsidies to Fannie Mae and Freddie Mac, that plan seems to have been dropped.
Housing remains a serious problem for our economy, but no matter what the President wishes, no federal program is likely to fix the problem.
The President’s deafening silence on health care reform - Kate Nix
The President’s health care law has been dubbed his “signature legislative accomplishment”, but he barely even mentioned the law in this evening’s address.
The President did claim that Obamacare relies on a “reformed private market, not a Government program”. This is not quite the case. Obamacare dumps millions of Americans into Medicaid, a poorly performing government health program, and creates a new federal entitlement to purchase coverage in federally-created exchanges. Its rules and regulations on insurance reduce choice, hinder competition, and will result in higher premiums for families and individuals. The law’s expansion of bureaucracy and government price controls in Medicare will limit seniors’ access to providers and reduce physician autonomy. And new penalties and taxes burden business and the growth of the economy by making it harder to grow and create new jobs.
True market-driven reform doesn’t require an expansion of government. It requires empowering patients, not bureaucrats, and creating a true marketplace with a number of options, offered by competing insurers. It means saving Medicare for future generations by giving seniors choice, and transforming Medicaid to better meet need in each state. And it means enacting rational, targeted insurance market reforms that won’t increase premiums or drive insurers out of business.
One of the best analysts of economic mobility and the income distribution in Washington today, Scott Winship at the liberal Brookings Institution, found little evidence to support the argument that changes in the income distribution has hurt the ability of Americans to move up the economic ladder. The President made this argument several times over the past several weeks and tonight in the State of the Union speech.
Rather, this wonderful country is nearly as mobile today as it was two generations ago when our fathers were working. True, we’re challenged today by a rapidly changing economic world…one that’s much more global and service based that in Dad’s days. And, true: the future of economic mobility is greatly threatened by growing debt that shows no sign of decreasing. Even so, the promise of American life remains alive for nearly everyone who lives and works here.
American Leadership AWOL Again – Ted Bromund
The President’s remarks in his State of the Union Address on foreign
policy were formulaic. This Address was about domestic policy and,
ultimately, about the 2012 election, which the President clearly
believes will be won or lost on the basis of his record at home.
Unfortunately, that does not absolve him of his responsibility to do
more than slot token references on events abroad into his remarks.
All Americans will agree that the death of Osama bin Laden at the
hands of American forces is an event to be welcomed and cheered. But
bin Laden was not the be all and end all of al Qaeda, and drone
strikes – no matter how tactically effective – are not the same thing
as a counter-insurgency strategy that works for the long haul. And
under Obama, the long haul has gone AWOL. Our departure from Iraq and
our impending bug-out from Afghanistan are not events to be
celebrated: they are signs of exactly the kind of short-termism that
he criticizes in the rest of his address.
Nowhere is this clearer than in Obama’s celebration of the war in
Libya, where the improvised U.S. intervention – against the disgusting
Qaddafi, a man who met the end he merited – stumbled through to an
outcome that its conduct of the war did not deserve. And contrary to
the President’s depiction of Libya as a triumph, the war in North
Africa is not over: we’re just not paying attention to it any more. As
with the President’s condemnation of Iran’s nuclear program, stirring
words are standing in for meaningful actions.
What is really striking about the Address is how much it left unsaid.
There was a quick mention of the free trade agreements with South
Korea, Panama, and Colombia, one of last year’s genuine
accomplishments, but no mention of the long opposition to them from
the President’s own party. The fraudulent elections in Russia and the
on-going collapse of the Euro were similarly missing, except for a
brief reference to the President’s determination to make sure that
Russia’s abusive behavior doesn’t affect his support for its admission
into the World Trade Organization. The President praised the steadfast
support of America’s allies in Berlin, Tokyo, and Rio, but his list
was telling: Germany didn’t support the NATO mission in Libya, Japan
has not so far supported the boycott of Iranian oil, and Brazil has
been a stick in the wheel impeding action on Iran.
And, finally, the United Nations and the treaties in which the
President invested so much hope in earlier years have disappeared
completely. For that we can be thankful, but it points out what the
Address as whole conclusively demonstrates: from its start to its end,
this Administration has always emphasized domestic policy, and has
taken only a sporadic and unserious interest in international affairs.
Not Rewarding Jobs Outsourcing, But Punishing Companies for Trying to Compete - J.D. Foster
President Obama says we shouldn’t have a tax code that rewards companies for moving jobs overseas. He’s right, and we don’t. In fact, we have one of the most punitive tax systems in the industrialized world for taxing the income companies make abroad.
In fact, only a few years ago, about half the industrialized countries in the world had a system about as punitive as our own. Today, almost every one of those countries have joined the ranks of competitive nations and adopted a simpler, more pro-growth, less protectionist system called Territoriality. Increasingly, American tax policy makers have recognized the U.S. needs to follow suit and adopt a territorial system of our own for taxing U.S. companies operating abroad. Not to reward them for moving jobs overseas, but to avoid penalizing them for trying to compete in global markets.
President Obama wants to go in the other direction. He wants to punish U.S. companies who try to compete abroad. When U.S. companies compete abroad, they make their entire enterprises more competitive, including their U.S. operations. What President Obama proposes appears and sounds like a policy to advance U.S. jobs and U.S. prosperity is, in fact, just the opposite.
Obama Doubles Down on the Worst U.S. Tax Policy – J.D. Foster
One of the universally acknowledged banes of the federal income tax has for years been the individual Alternative Minimum Tax. Borne in its current form in the 1986 tax reform act, this parallel system which runs in parallel to the regular income tax forces taxpayers to calculate their taxes twice and pay the larger of the two.
Today, this tax makes no sense, and most tax reform proposals of sufficient heft seek as a primary goal the repeal of the AMT. Tonight, President Obama proposed not merely to embrace the AMT in principle, but to extend the principle robustly to the business income tax – to create a new basic minimum tax for businesses. Once again, when it comes to tax policy, President Obama sees what needs to be done – and does the exact opposite.
“Routine Business”? How About Passing A Budget? - Emily Goff
The President called on Congress to change the way it does its business, making mention of how difficult it is to conduct “routine business” in the Senate. Passing a budgeting comes to mind as something that should be routine. Yet in the past 1,000 days, the Senate has failed to pass a single budget.
Social Security Silence - David John
In a night of disappointments, the complete lack of any mention of Social Security other than as an excuse to raise taxes was one of the greatest. Although the Social Security trustees, several of whom are members of the President’s cabinet, has warned that the program faces perpetual deficits, the President evidently has no plan to protect the retirement security of millions of Americans who face a 25% benefit cut in less than 25 years. Most officeholders join the President in treating Social Security as an issue that can be discussed later – much later, but the reality is that just like a leaky roof, the longer that the President and Congress waits to fix the program, the more expensive the reforms will be.
A Failure to Understand Fundamental Rights - Hans von Spakovsky
President Obama showed once again that he does not understand the First Amendment or understand his obligation as the executive to help protect the rights of Americans to engage in political activity and political speech, as well as to “petition the Government for a redress of grievances,” i.e., lobby the government. In his state of the union speech, Obama proposed that “people who bundle campaign contributions for Congress” should be barred from lobbying Congress and vice versa. This would be a restriction of fundamental political rights that could not be implemented by Congress without a constitutional amendment. It is shameful that the President, who swears an oath to defend the Constitution, has chosen to attack First Amendment rights for a second consecutive State of the Union address.
Do Teacher Pay Recommendations Make Sense? - Jason Richwine
Deciding how much to pay teachers is properly a matter for state and local governments, not Congress. But federalism issues aside, do the president’s recommendations on teacher pay make sense? He calls for rewarding the best teachers with higher pay and for removing ineffective teachers from the classroom. This kind of merit-based system would be ideal, but the president also says that teacher pay is currently “modest,” and he implies that schools do not have the resources to reward high-quality teachers.
Public school teachers are, in fact, very well compensated. They receive more compensation, particularly in the form of pension and health benefits, than they would receive in the private sector. Before increasing spending on teacher salaries, public school districts should use their existing resources more efficiently. Unfortunately, union rules often severely limit payroll flexibility-stipulating, among other senseless things, that gym teachers must be on the same pay scale as math teachers.
The president also repeats a misleading argument about job security for teachers. He notes that thousands have recently been laid off, but he does not mention that the unemployment rate for public school teachers has been considerably lower than that of comparable white collar occupations.
What’s Missing? Entitlement Reforms – Patrick Knudsen
Conspicuously absent from the President’s address was any acknowledgement of the government’s biggest challenge: the imperative of entitlement reform. This may not be surprising for a President who never tires of finding new ways to expand the federal government. But the omission reflects an unwillingness to face up to “the most predictable crisis we’ve ever had,” in the words of House Budget Committee Chairman Paul D. Ryan.
Runaway entitlements are the principal drivers of today’s record spending and debt. Over the next 10 years, entitlement spending will total about $26 trillion; and in2021, spending on all entitlements will total about $3.3 trillion, nearly the size of the entire budget today.
Spending on the three largest entitlements – Medicare, Medicaid, and Social Security – will outpace inflation and the growth of the entire economy; and by the middle of this century, those three programs alone will spend as much as the total annual average of tax revenue over the past 40 years – putting the squeeze on all other policies (such as national defense and low taxes).
But the President, who must lead the drive for a solution, ignores it. Indeed, his premier achievement – nationalizing health care – will worsen the problem.
Nor can the problem be solved with modest trims around the edges of these programs. They need to be fundamentally restructured. The President’s failure to recognize and speak forcefully to this challenge suggests, regrettably, that his budget will skip it as well.
Even More Spending – Patrick Knudsen
As he has done throughout his tenure, the President keeps finding ways to advocate more spending – just the opposite of what the country needs. He clings to the view that innovation and economic growth require Washington’s direct involvement – without the nurturing and guidance of his progressive politics. He simply does not trust entrepreneurs, investors, and free markets.
He wants to pour more Washington money into education; more into science and research, and high tech manufacturing; more roads, bridges, and high-speed rail such as the ever-more-costly boondoggle in California.
He believes that Keynesian-style deficit spending is still needed to generate more demand and boost the economy – despite overwhelming evidence to the opposite. His 2009 stimulus bill is a monument to this failed economic thinking.
Besides, this spending will have to be paid for, and since Obama has yet to propose a serious reduction to federal spending that means it would likely be through higher taxes or more debt – and both will further drain the economy.
Slinging Arrows at Non-Bank Businesses - Diane Katz
In a single sentence, the president dismissed as corrupt an entire industry of financial services that serves tens of millions of people annually. While the CFPB has yet to undertake a single examination of the non-bank industry, and its director has pledged to give the industry a fair hearing, the administration obviously has concluded that all nonbank businesses can’t be trusted and consumers are too stupid to decide for themselves what types of services suit their needs. What consumers really ought to be worried about is the absence of accountability that marks the administration’s new consumer bureau. To the extent the bureau excessively constrains financial services, consumers will be the big losers.
Want to Bring Back Jobs? Avoid Overcriminalization- Joe Luppino-Esposito
President Obama claims that he wants to bring more manufacturing jobs back into the United States and wants to encourage small business and entrepreneurship by tearing down regulations.
He can start by avoiding the criminalization of American businesses by means of outrageous statutes such as the Lacey Act. Just ask the workers at the Gibson Guitar plant in Tennessee, who were confronted by armed federal agents because of allegations that they imported wood from India that wasn’t properly finished with Indian labor. That’s right: the administration is seeking to enforce protectionist labor laws for other countries. Thanks to the Lacey Act, violation of environmental regulations of a foreign nation becomes a federal crime. Gibson’s CEO has come out swinging against the Lacey Act, but if the President meant what he said about protecting US jobs, then after tonight, he should find an ally in Obama, who can tell his Department of Justice to stop pursuing Gibson.
Entrepreneurs such as Abner Schoenwetter, would also like to get some relief from regulations: Honduran regulations, that is. He too was found guilty under the Lacey Act because of using plastic bags instead of cardboard boxes to ship lobsters for his seafood importing business. Schoenwetter spent five years in a U.S. federal prison for his regulatory errors.
So if Obama wants to encourage American jobs, he would do well to stop making it a crime to engage in business here.
Cordray On the Job? Not So Fast, Mr. President - Todd Gaziano
Obama: “Today, American consumers finally have a watchdog in Richard Cordray with one job: To look out for them.”
But Cordray is not legitimately on the job, because he was never legally appointed. What’s more, the President should not to play games with the appointment if the position is so important to fill. The President’s purported appointment of Cordray to the Consumer Financial Protection Bureau and three others to the National Labor Relations Board (NLRB) when the Senate was in periodic pro forma sessions cannot be justified by any supposed emergency or any other legal argument. (The nominations to the NLRB had only been submitted to the Senate in late December and had not even filled out their Senate confirmation questionnaires.)
The attempted, unilateral appointments were unconstitutional regardless of the President’s rationale because the Senate had not adjourned its session and had not confirmed the nominees. And the administration’s post-hoc attempt at a legal justification by the Department of Justice’s Office of Legal Counsel is not only sweeping in its claim of tyrannical power, but it is an embarrassment to the Attorney General and Department’s lawyers who normally issue such advice. In sum, the “I can’t wait” line would not work for a third-grader trying to justify his serial rule breaking. It certainly is not a constitutional pass for a President who pledges to support and defend the Constitution.
AWOL on Nuclear Deterrence - James Carafano
Apparently, what the White House is doing on nuclear weapons—decisions that could affect the life and death on mankind—don’t rate a mention in the State of the Union. That is unbelievable considering the president is promoting the most sweeping changes in the American nuclear deterrent in the last 60 years.
Doggedly pursuing his “Road to Zero,” President Obama is vitiating the U.S. nuclear deterrent force. If he gets his way, America will have a significantly smaller nuclear arsenal and atrophied delivery systems (air, land and sea). We will also never build a new nuclear weapon or construct missile defenses adequate to protect us from the global ballistic missile threat. The White House signaled as much the Pentagon’s “strategic guidance” which announced the president is not nearly done cutting America’s nuclear forces. Per the guidance: “It is possible that our deterrence goals can be achieved with a smaller nuclear force, which would reduce the number of nuclear weapons in our inventory, as well as their role in U.S. national security strategy.”
That the president should make such sweeping decision to gut nuclear forces at the same time he is gutting our conventional forces should have at least rated a mention in an address to the nation.
When is enough, enough? – Joe Luppino-Esposito
President Obama says that he wants even more fraud laws and penalties on the books for financial institutions. Even putting aside all the new crimes in Dodd-Frank, there are already numerous laws prohibiting fraud on the federal books. Indeed, back in 1999 Professor Ellen Podgor counted 92 uses of some form of the word “fraud” in federal criminal law! As Paul Larkin has noted, Congress continues to pile on criminal laws regarding fraud, going as far as to propose that there should be an additional fraud law just for maple syrup. Former Attorney General Ed Meese noted this in his Congressional testimony last month, asking “Will we, as a society, not be taken seriously about fighting fraud unless we double, triple, and quadruple the number of iterations of this crime?”
For Obama, the answer is a resounding, albeit ridiculous, “Yes.”