My estimable colleague, Clive Crook is digging deeper into that which concerns me about Barack Obama. The good senator is now proposing an "Economic Patriot Act" which attempts to prevent outsourcing by giving tax subsidies to companies who don't employ a lot of workers overseas, while levying taxes more heavily on firms with a lot of foreign profits. This is, as Mr Crook notes, "radical--and, on its economic merits, remarkably stupid." It is basically unenforceable--all you will succeed in doing is encouraging companies to divest foreign subsidiaries and do business at arm's length, thus sacrificing whatever residual influence you had over them. America's corporate income tax is, to the great surprise of the majority of people who think of us as the "pro-business" society, one of the highest in the developed world. We also, strangely, try to collect taxes on foreign earnings from workers and companies alike, which strikes the rest of the developed world as thoroughly ridiculous. Hence, companies and people are going to work hard not to have any foreign earnings subject to tax.
Does Obama mean it? It's hard to tell. We're going to be seeing a lot of this at least through March, because rusty old Ohio is where Hillary Clinton is trying to reverse her campaign's decline with a major win. As Daniel Drezner remarked to me yesterday, the sad fact is that a lot of swing states are in the rust belt, which means that you can expect to see protectionism on the agenda over and over again through November. It's very possible--given who his advisors are, and what they say--that Obama is just proposing these never-never policies to shore up his political base in the old industrial states.
But does that even matter? After all, one might argue, if he runs on protectionism, he'll have to deliver in office. Well, actually it does. George Bush promised to protect the steel industry when he ran in 2000, for the same reason Obama may be sounding so anti-trade; he needed the swing states. In office, he delivered--but in a particularly stupid way that was thoroughly unlikely to withstanding a WTO challenge. Looked at that way, the very stupidity of Obama's plan may be a feature, not a bug; it signals voters that he cares, but signals policymakers that he's not really going to do much.
Of course, "I support my candidate because I'm sure he's lying" is hardly a stirring rallying cry. And there remains the disturbing possibility that he's serious about all this.
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