John Hood: About those dueling jobs plans
By John Hood
RALEIGH — I guess it was fitting that on Labor Day weekend, President Barack Obama and several of his critics released details of their respective plans to tackle the nation’s chronic unemployment. There were few Americans more attentive to these developments than the residents of North Carolina, which according to the latest figures has one of the weakest economies in America.
Four dueling plans made headlines the morning after Labor Day. During a speech at a union rally in Detroit, President Obama made it clear that his jobs plan would include additional extensions of unemployment benefits and payroll tax relief. He is also pushing Congress to approve new trade deals and a plan to use federal borrowing to induce more infrastructure spending.
Speaking in the early-caucus state of Nevada, GOP presidential hopeful Mitt Romney outlined his own jobs plan, which included a lower tax rate on corporate income, no tax rate on dividends or capital gains, and a “regulatory budget” that would cap the total cost of federal rules. Under such a system, if the administration wanted to impose a new regulation it would have to remove an existing regulation with a similar estimated cost.
Former Utah Gov. John Huntsman also chose the Labor Day weekend to outline his tax-reform plan in a newspaper column. It would pull the top marginal tax rate down to 23 percent while eliminating special deductions and exemptions.
Finally, the U.S. Chamber of Commerce sent an open letter to Congress and the White House recommending that Washington reduce corporate tax rates, removed obstacles to new domestic oil and gas exploration, induce more infrastructure investment, and promote tourism through reforms of airline security and visa issuance.
Were they all playing politics by releasing their jobs programs around Labor Day? Yes, despite the fact that in his Detroit speech President Obama insisted that “the time for Washington games is over.” The fact that Obama, Romney, Huntsman, and the Chamber were all acting politically doesn’t mean that they were necessarily acting in bad faith. All four actors surely believe that their recommendations will strengthen the nation’s economy.
They can’t all be entirely right. But they are all partially right, in that the ideas they have in common — such as free trade and tax relief — would certainly help the situation.
However, on tax relief they have different priorities. President Obama listens primarily to demand-side economists, so he thinks Washington should try to stimulate consumer demand. That means cutting payroll taxes and extending unemployment benefits, both on a temporary basis, hoping that households spend the money on new goods and services.
Would-be presidents Romney and Huntsman listen primarily to supply-side economists, so they think Washington should try to stimulate entrepreneurial activity and business investment. That means eliminating the double-taxation of investment returns and reassuring executives and entrepreneurs that their future profits won’t be eaten up by future tax rates or regulatory compliance. That means permanent reforms, not temporary ones.
As for the Chamber, its leaders pay a great deal attention to the interests of major association members such as international firms, the energy sector, and the construction industry. So they included specific policies designed either to lighten the load on these businesses or toss federal funds in their direction – or both.
In my view, the best mix of policies to remove obstacles to job creation would be to (1) pass long-delayed trade deals now, (2) help states make their highway dollars go further by lifting costly environmental and wage regulations, (3) adopt permanent pro-growth tax reforms, (4) adopt Romney’s regulatory budget initiative, and (5) approve a clear path to a balanced budget that includes major cuts in federal spending, including entitlements.
Now that I’ve made them a to-do list, I’m sure the folks in Washington will get on with it. Behold the power of the press!
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Hood is president of the John Locke Foundation and publisher of CarolinaJournal.com.