Commentary by Kevin Hassett
Jan. 19 (Bloomberg) -- Ten months ago in this space, I compared President Barack Obama’s economic agenda to that of a “Manchurian Candidate” whose designs were intentionally negative. The alignment of the two was eerie.
Today, it looks even worse.
That hypothetical Manchurian Candidate might, for instance, seek to lift the level of policy uncertainty as high as possible by announcing plans so ambitious as to create confusion about what is to come. With the rules of the game in play, businesses would have a difficult time making commitments to expand operations and hire new workers.
The level of uncertainty in the past year has been unprecedented. From cap-and-trade to health care, enormous changes have been in play for extended periods without real resolution.
The role of uncertainty is getting noticed. Nobel Prize- winning economist Gary Becker, along with his University of Chicago colleagues Steven Davis and Kevin Murphy, cited policy uncertainty as a key factor suppressing the recovery. The Obama team, they wrote in a column in the Wall Street Journal, “should have put plans to re-engineer the economy on the backburner, and kept them there until the economy emerged fully from the recession and returned to robust growth.”
Our hypothetical Manchurian Candidate also might launch a more overt war on business. In this regard, the Obama administration has surpassed my worst fears.
Tax Confusion
It continues to advocate, and may well accomplish in 2010, a massive increase in business taxes. It looked on as the House passed a so-called millionaire surtax that would fall heavily on small businesses. All this on top of the 113 tax provisions that have expired or will expire in 2009 and 2010, many of them exemptions, deductions, credits and other measures that lessen the burden on taxpayers, according to Congress’s Joint Committee on Taxation.
Obama also is waging an assault against the U.S. Chamber of Commerce. While many presidents in the past have had policy disagreements with the business lobby, they have remained respectful. A series of articles in the Washington Post have described the many steps the Obama White House has taken, such as excluding the chamber from invite lists and going around it to speak directly to its members (and presumably to lean on them to distance themselves from the chamber).
Two additional Manchurian strategies have emerged in the past year.
Rewards for Support
The first is the movement toward turning the U.S. into a kleptocracy. The health of a nation depends on the rule of law, the idea that if you build something valuable, you will be able to keep it. Too often this year, policy has provided pecuniary rewards to Obama’s supporters and punished his opponents.
Rather than let General Motors Co. go through bankruptcy and emerge with a chance to be competitive (as some airlines, for example, have done), the administration placed labor interests above those of creditors and preserved the fat union contracts killing U.S. automakers.
Similar deals have emerged elsewhere. The administration helped kill a District of Columbia scholarship program that allowed underprivileged kids to escape the clutches of the teachers’ unions. Now it’s ready to exempt union members from the ironically titled “Cadillac” tax on generous health plans. National Review editor Rich Lowry described this exemption as part of a “grotesquerie of pay-offs to favored politicians and interests.”
Obama’s supporters expect other political payoffs. Unions see 2010 as their window of opportunity for passing the Employee Free Choice Act, which among other things would do away with secret-ballot elections and allow unions to organize through a simple majority sign-up procedure.
Labor’s Confidence
In a speech at the National Press Club last week, AFL-CIO President Richard Trumka said, “I think you will see the Employee Free Choice Act pass in the first quarter of 2010.” If it does, it will be another devastating blow to American business.
The final move has been to expand government to such a degree that the notion of a bankrupt U.S. becomes plausible. Obama’s supporters assert that the deficit problem was inherited; that is only partly true.
First, the recession was likely deeper because of the fears aroused by Obama’s anti-market policies. Second, spending has skyrocketed, significantly exacerbating the problem. If spending were held at the level that Obama inherited from Bush, the deficit over the next 10 years would be $3.7 trillion as opposed to $7.1 trillion.
Wasted Fixes
While the pending health-care legislation doesn’t technically increase the deficit, it expands entitlements massively and pays for that with fixes that should instead be used to address existing problems. Those existing problems become intractable if all the sensible cost saving is devoted elsewhere.
Ominously, bond raters have begun to notice. Moody’s Investors Service last month said the top debt ratings in the U.S., as well as in the U.K., may “test the Aaa boundaries.”
President Obama clearly is not a Manchurian Candidate. Unlike the fictional brainwashed president in the movie, Obama and his team want the best for our country. But their ideologically driven choices have led to a constellation of policies indistinguishable from a nightmarish Manchurian platform.
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