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In Wednesday's State of the Union address, President Obama declared that "jobs must be our No. 1 focus in 2010." So why won't he stop scaring the investors who create jobs with proposals for new taxes and regulation?
Despite the deepest recession since the 1930s, Obama spent much of his first year pursuing policy initiatives unrelated to economic recovery, especially health insurance reform and carbon regulation. Investors don't know what new programs the government will enact or how it will raise their taxes to pay for them — and that makes them reluctant to invest.
The president could spur investment and job creation if he would calm the market's nervousness about policy changes. He should take steps to reassure markets about his intentions on taxes, health care and carbon, so investors do not have to speculate about what the government will do to their future profits.
The clearest opportunity is on tax policy. President Obama has already made clear that he intends to let the Bush tax cuts for high earners sunset next year, restoring a top income-tax rate of 39.6%. But that's a floor — investors don't know how high tax rates could go. For example, the House health care bill would take the top rate to 45% and also raise taxes on capital income.
Obama should announce that he will veto any bill that raises income taxes higher than Clinton-era levels, so investors and small- business people have clear expectations about how they will be taxed. It would be best to also maintain the 15% capital income rate set in 2003; but even a firm commitment to a 20% rate — again, the Clinton-era level — would provide valuable certainty.
The health care bill is also a source of market uncertainty. The primary risks to employment from the health care bill come from damaging tax provisions and potential rises in employee insurance costs.
So long as he holds the line on tax and cost-control measures — essentially, insisting that the Senate bill remain as untouched as possible, with principal reliance on an insurance premiums tax instead of new income taxes — Obama can greatly reduce investor nervousness. (Calming the restive electorate is a separate matter.)
On carbon regulation, Obama should admit the obvious — cap-and-trade is politically radioactive until the economy improves — and put it on the shelf. Climate change is a long-range problem, and there is no need to attack it during a major recession when the electorate is least receptive to energy taxes.
Despite the president's efforts to put a better face on the disaster, the Congressional Budget Office tells a frightening story of an already-too-large public debt rising precipitously from 41% of GDP in 2008 to at least 92% in 2020 largely because of: (1) About $2.7 trillion of what was ...
A full year into his presidency we suddenly discover what it takes to get Barack Obama all worked up. Not terrorism. In the president's estimation, a near repeat of the Lockerbie bombing Christmas Day wasn't worth remarking on until three days later. Not the risk of a fiscal doomsday. Only after 12 ...
Federal Reserve Board Chairman Ben Bernanke is on the hot seat in Congress as he faces an upcoming Senate vote to confirm a second term. The principal reason for slow-roasting Bernanke: anger over the chairman's alleged inattention to the problems building up in the U.S. finance industry. In some ...
As the Massachusetts blame game unfolds, the president's unpopular health bill leads the list. But the substantive provisions of the bill were just part of the problem. Perhaps more important, voters were appalled by how the deal unfolded. Consider the pre-election giveaway to the labor unions. ...
Americans are concerned about the Obama administration's approach to national security, with ideology a major influence on where they stand. As liberals support Obama's policies, nonliberals back tougher approaches. These are the key findings from the latest IBD/TIPP poll of 923 Americans completed ...
Posted By: Judith from Michigan(725) on 1/28/2010 | 10:29 PM ET
Mr. B, you pose your questions of the O. admin. under the assumption that it WANTS to grow the economy, promote employment and support business and industry. May I suggest that this is not the O.admin goal. Hard as it is to believe, I contend Mr. O & Co are deliberately downgrading the US in order to destroy capitalism & install a European-style Socialist govt. No one of any intelligence would make such bad decisions as they are doing. Can you prove me wrong?
Posted By: dwdrury(535) on 1/28/2010 | 10:09 PM ET
By now it should be clear to all BO Plenty takes his economic, and other, pointers from FDR. FDR's treasury secretary noted all the millions poured into make work programs with little result, save a massive government debt burden. Thus did FDR turn a serious recession into the Great Depression and created the conditions leading to the unrest in Germany, the rise of Hitler, and the 2nd world war. This is Obama's model? Yikes!
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