Obama’s Economic Patriot Act

Avidly seeking the blue-collar vote–in Wisconsin today and Texas and Ohio on March 4th–Obama continues to pump up the anti-trade populism, and to tack even further to the left. Ed Luce reports in the FT:

Barack Obama on Monday made an aggressive pitch at Ohio’s blue-collar workers by proposing a “Patriot Employers” plan that would lower corporate taxes for companies that did not ship jobs overseas.

The proposal, which came two weeks before the critical Ohio primary and just before on Tuesday’s nominating contest in Wisconsin, is the most radical any presidential candidate has put forward so far to mitigate the perceived effects of globalisation on US manufacturing…

Mr Obama’s plan would lower the corporate tax rate for companies that met criteria including maintaining their headquarters in the US, maintaining or increasing their US workforce relative to their overseas workforce, holding a neutral position in union drives among their employees and providing decent healthcare.

Yes, it is radical–and, on its economic merits, remarkably stupid. Are we even intended to take this seriously? “Holding a neutral position in union drives,” for heaven’s sake? That becomes a criterion for setting the corporate tax rate? “Providing decent health care,” whatever “decent” means? (I thought he had a plan for reforming healthcare; is this nonsense now part of it?) Hillary is making new populist thrusts as well, but nothing, so far as I know, as barking as this. It would take a lot to persuade me that Obama is the wrong choice for Democratic nominee, but if he keeps this up he might do it. And surely it is all an unforced error; Ed Luce again:

Mr Obama’s plan met instant scepticism from otherwise sympathetic Democratic economists who said it would require a large regulatory apparatus to put into practice. They also said that companies could “game the system” by spinning off overseas subsidiaries in order to reduce the offshore-onshore workforce ratio.

They questioned whether it was necessary to provide incentives for employers to provide health insurance since Mr Obama’s healthcare plan would already mandate them to do so. Finally, Mr Obama has already tied up the estimated $10bn (€6.8bn, £5.1bn) in revenues that would be saved from abolishing tax incentives for multinational companies that retain their profits overseas.

“I would say that this plan is borderline unimplementable,” said a Democratic economist in Washington. “It is also puzzling. Normally presidential candidates only come up with plans that are unrealistic when they are losing. But Obama is now the favourite.”

Earlier my friend Jonathan Rauch directed me to this article by Steve Chapman in the Chicago Tribune. It argues that Obama is more suspicious of heavy-handed economic intervention than Hillary.

In her campaign, she presents herself as an experienced hand with a penchant for practical solutions, suggesting that her opponent, U.S. Sen. Barack Obama, dispenses nothing but vaporous oratory detached from the real world. When it comes to the mortgage meltdown, though, her policy rests on the assumption that upon arriving in the Oval Office, she’ll open the closet and find a magic wand. Obama, by contrast, acknowledges the bitter truth that when government regulators clamber into a carriage, it can easily turn into a pumpkin.

Their approaches to the problem are not an aberration but a symptom of a larger difference. Obama is not a staunch free marketeer, but he grasps the value of markets and shows some deference to economic laws. Clinton, however, tends to treat both as piddly obstacles to her grand ambitions.

As I read the article, I was mostly nodding in agreement. But Obama’s evolving views on corporate patriotism have got me wondering. Can a man who “grasps the value of markets and shows some deference to economic laws” really think this new proposal, political expediency aside, is a good idea?

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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