Enemies of American Prosperity


Bill Galston measures the State of the Union against the criteria he suggested yesterday. Interesting observations, but I would have liked to know whether he thought the speech was any good.

Myself, I wasn't much impressed. The speech was far too long (as SoU addresses nearly always are) and well before the end I wondered if anybody who wasn't being paid to listen was still attending. It's a small point but I also find that Obama's thing of letting his voice break for emphasis on key words has become very annoying. It's now a tic. He does it too much and it no longer signals sincerity--rather the opposite.

The theme was "an economy built to last". Bad metaphor. Successful economies aren't castles or cathedrals. They aren't "built to last". They are perpetual works in progress, in a constant state of being unbuilt and rebuilt. And they don't have one master builder.

The lofty rhetoric seemed disconnected from the endless small and mostly humdrum proposals (many of which, I grant you, have a lot to be said for them). There were some bigger ideas too, but they were always left vague. The Buffett rule for instance. All those earning $1 million or more should pay at least 30 percent of their income in taxes, the president said--a good idea, and a deft jab at Mitt Romney, for good measure. But what does "income" mean? You could make the Buffetts and Romneys of this world pay 30 percent of their income from employment and they wouldn't even notice. The same goes for raising the top marginal rate of income tax to, say, 99 percent. On the other hand, tax capital gains and dividends at ordinary income tax rates--as I would favor--and Buffett might wish he had never opened his mouth. Is that what Obama is proposing? Or does he have a second alternative minimum tax in mind--an alternative to the alternative to the main code? For the sake of simplicity.

At the same time, he reaffirmed his commitment to no tax increases on households making less than $250,000 a year. You can't balance the budget that way.

The main thing that made me wince was the emphasis on outsourcing as the greatest threat to American prosperity. In my book, it's a bad idea to criticize firms that strive to drive down costs. Well, you might say, greater efficiency might not be all bad, but we certainly shouldn't subsidize firms to move jobs abroad--and that was Obama's point. Again, what would this denial of subsidy actually mean?

Perhaps it means denying government contracts to firms that outsource, as many Democrats advocate. Perhaps it means taxing outsourcers more heavily. Two points on this. First, using taxpayers' money to buy from higher-cost rather than lower-cost producers would seem to create a subsidy rather than end one. Second, do we really want to victimize Apple that way? No more Macbooks in schools or publicly supported colleges? No more iPhones in the White House? If that would be going too far, maybe just tax the company until it moves to Canada? It seems a high price to pay, even for an economy built to last.

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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