Centrist Pundits

President Obama is in the news today discussing the closing of a number of loopholes in the corporate tax structure.  Details can be found at various sources on the internet, such as http://money.cnn.com/2009/05/04/news/economy/obama_corporate_tax_proposals/index.htm

Obama’s stance is that there are unintended consequences in the way these codes are written that make it too easy for corporations to send work overseas and still get tax breaks in the U.S.  Opponents of what Obama is intending are saying that every time you raise costs for a corporation, they become more likely to just pack their bags and go wholesale to some lower-cost nation.

I’m reminded, to some degree, about the minimum wage debate.  Raising the minimum wage is seen as a good idea because it keeps those earning the lowest amounts at least somewhat able to afford food, shelter, etc, and keeps them from being exploited.  On the other hand, it can force small businesses to close their doors and it can make larger businesses go overseas.  In fact, it is a fairly predictable and easy formula – if it costs less to have someone make it in, say, Malaysia and to ship it here then it does to have it made here, then the job will go overseas. 

That same kind of formula could apply to the tax costs – if it costs a corporation more to do business with the HQ in America then it does for them to do their business while based elsewhere, then they will move elsewhere.

My problem is I’m just not sure how to win, here.  If we leave the loopholes open and they continue to provide jobs overseas while getting tax breaks here, how is that really any better than if they just move overseas entirely?  I guess the thought is that the few jobs they are providing here in America are better than the none that they’d be providing if they moved?

“Win” here is pretty simple: provide good jobs to Americans.  So what’s the best way of encouraging corporations to do so?  Seriously, I’m asking you.

JC Economy budget, commerce, finance, international, obama, taxes

The Obama budget has passed both the House and Senate this evening.  I have no doubt that Greg and I both have more to say on it than this, but I want to point out two things immediately:

I have no idea what will happen.  I hope it will help.  I fear it will make things worse.  I’m leaning toward help, but it could go any direction.

But here’s the second thing, and it is kind of obvious, and I think it is something we can call agree on: dang, that is a lot of money.

JC Congress, Economy budget, Congress, finance

The actual Republican budget alternative, the one with actual numbers instead of the “gist” of things, is now out.  It is really not all that surprising; it focuses on limited spending – except for defense – and tax cuts.  In some ways, it is very much like a proposal from when Bush was in office, or if McCain had won, although perhaps slightly more fiscally conservative than Bush’s requests.

I will give the budget some credit.  First of all, I think it really does present an alternative to the Obama proposal.  I’m fairly sure it is not, overall, a good alternative, but at least the game is actually starting now.  And a couple of points are actually good ones.  More money for veterans is generally a good thing, depending on how they want it spent.  (I remember that certain leading Republicans aren’t fans of the GI bill, which does nothing but anger me)  And this may be the one time, the one time in all of recent history, where I like the idea of cutting capital gains taxes; very few are making capital gains right now anyway with the economy like it is, and if the cut encourages new people to invest, that may be a good thing.

On the other hand, many of the other tax cuts (or tax cut extensions) are the same kinds of proposals that helped create the mess.  I have no problem, as mentioned before, with more, not fewer, steps in our tax rates.  I’m of mixed feelings on corporate tax rate cuts – corporations can afford to pay, but on the other hand, no one wants them fleeing oversees, either.

I find the idea of putting more money in for defense spending than Obama wants to be rather crazy.  Obama is, for better or worse, the commander in chief, and the military is going to do what he says it is going to do, so putting more money in to it seems a bit like catering for 100 guests when the wedding is only having 25 people.

Representative Paul Ryan, who is the ranking Republican on the House Budget committee, stated that the President is “exploiting” the current economic problems to spend trillions on programs.  He may or may not be right.  The President would argue that he’s spending trillions on fixing the underlying problems in America which feed the economic crisis.  Po-tay-to, Po-tah-to.  But perhaps, just maybe, hoping against hope, will we see the Republican numbers and the Democratic numbers play well together, and have something develop more in the middle of the road?

Alas.  Probably not.

JC Congress, Economy, Political Parties budget, Congress, finance