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With Many Businesses Closing Their Doors, It's Time to Open a "Repatriation Window"
Remember the good ol' days? Back when the United States only had the second highest corporate tax rate in the industrialized world? Those were good times. But with Japan having implemented a 5 percent cut in their corporate rate (and potentially seeking further reductions) America is left with the ignominy of taxing it's businesses more than any other developed country.
Permanent and fundamental reform is needed to reduce America's corporate income tax burden. Unfortunately, beyond punitively hiking taxes on a few disfavored industries (oil), President Obama has shown little willingness to make any wholesale changes to our uncompetitive tax regime.
But as NTU has argued, while we're waiting on the politics of larger reform, can't we at least build a consensus around a common-sense corporate tax holiday? The idea would be to create a period of time in which U.S.-based businesses could repatriate, that is to say, bring back, foreign earnings that they were stashing overseas so as not to pay our sky-high tax rates.
Sure, it's not ideal, but it could allow companies to reduce debt, increase investment, and jumpstart hiring. And in case you've been living under a rock (or vacationing in Martha's Vineyard) those are three things the American economy could sorely use right about now.
So what's the hold up? Well, some have begun to argue that the cost of a repatriation window is just to high, especially at a time of deep deficits. They say that the expectation of future tax holidays would lead businesses to simply park their cash overseas rather than bring it back at normal tax rates.
A new study out by NDN, a progressive think tank, should allay these fears. "Rather than the $78.7 billion revenue loss projected by the JCT, enacting a "repatriation" provision similar to H.R. 1834 this year would likely bring in a net $8.7 billion over 10 years to the U.S. Treasury," says the group via press release.
The study also found that the last repatriation holiday led to significantly more money being brought to the U.S. than expected under the JCT model and did not lead to a sharp decline in money repatriated at the standard 35 percent rate.
Washington should absolutely push for more fundamental corporate reforms to ensure American businesses remain competitive in the global economy, but in the meantime a corporate tax holiday could provide a useful boost to GDP while also helping to pay down our staggering deficit.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Friendly Reminder: FCC's Actions are Stifling Job Creation
Remember back in 2009 and 2010 when Democrats in Congress were debating how best to craft government intervention in the health care sector, which accounts for about one-sixth of the American economy? Good times! (Not really) Well, at about the same time the Federal Communications Commission was debating how best to craft government intervention into the world of the Internet, which itself accounts for another one-sixth of our economy. Despite the vigorous opposition of NTU and innumerable other public policy groups and Members of Congress, the FCC plowed ahead with an ill-advised "net neutrality" scheme giving bureaucrats regulatory power over network management. This power-grab threatens to undermine one of the most vibrant portions of our increasingly fragile economy. Unfortunately, it's par for the course for the present Administration.
Once again, the President is trying to have it both ways on job creation. Allies in Congress and his executive agencies have pursued policy after policy that reduce growth potential, while at the same time trotting out tired plans that they can tout as economic progress. Meanwhile, whether you look at start-up companies, tech operations, energy concerns, or small business owners, the only thing most entrepreneurs have received from the President and his agencies has been more red tape, more burdensome regulations, and more hoops to jump through.
Just last week, the FCC unveiled a plan to create jobs and boost our stalled economic recovery. OK, you might say, sounds like progress. Did they announce they'd be abandoning net neutrality and its stifling effects, something that would help to clear out barriers to job creation? No, of course not! Their plan involves getting more Americans working in call centers.
When it comes to the world of telecom, the solution to our job market woes is not another tour of federal regulators touting a poll-tested message about innovation. The solution lies in the Administration finally taking steps to empower business owners to grow their companies, reach new markets, generate a new wave of technology innovation, and hire new employees. In short, the solution is getting government out of the way, just as it was out of the way for the unprecedented explosion of the Internet.
Job creation is more of an art than a science, but one thing that is certain is that the federal government is all thumbs when trying to point the way to our economy's future. Instead of empowering bureaucrats to solve non-problems, the President and the FCC should immediately ditch harmful net neutrality policies and pursue a regulatory streamlining that will ease burdens on Internet users and businesses.
While that path would be a much smoother one than we're currently on, I would simply say (to use my favorite phrase) that I'm crossing my fingers, but not holding my breath. Let's hope the President and his FCC proves my cynicism misguided.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The fallout from late Friday’s downgrade of the U.S. sovereign debt rating has only begun to settle on the global economic landscape – and the pundits are busily sweeping their analytical Geiger-counters over the scene to determine the extent of the damage as well as the prospects for clean-up. But even before S&P dropped its bomb, the protective measures that just might have kept us out of the mess were self-evident. Look no further than earlier that day, when markets reacted positively to the “somewhat stabilizing news” that debt-riddled Italy would more aggressively pursue fiscal consolidation through entitlement reforms and a Balanced Budget Amendment to its constitution.
At least one chamber of the U.S. Congress understood the importance of such an approach earlier in July, when the House passed the NTU-backed Cut, Cap, and Balance plan and later a bill that required passage of a BBA before a medium-term increase in federal borrowing could occur. When House Speaker John Boehner released the first version of the Budget Control Act, which did not contain the BBA enactment clause, we cautioned that, “What should really terrify Members [of Congress] … is the very real prospect that even enactment of the Boehner plan, which may prove a career-ender for lawmakers who promised bolder action, will not be enough to fend off a downgrade in our nation’s credit rating …”
In the end, lawmakers balked at a mandatory BBA provision, a major reason behind NTU’s opposition to the final version of the Budget Control Act that President Obama signed into law. But our warning was hardly gifted insight: as many other scholars have shown, successful fiscal adjustments in other nations are largely marked by a reliance to tackle spending (especially benefit programs) rather than raise taxes, and to institute solid budget-process reforms.
So now America’s era of fiscal exceptionalism is over. Welcome to the ugly new reality. Am I being a doomsayer? All right then, here are the obligatory caveats:
Feel better now? Me neither. No matter what else happens, our leaders have irrevocably squandered the intangible but still valuable “confidence dividend” for investors that comes with an unbroken AAA rating. From this point forward, at best we can hope for an asterisk beside the name “United States of America” in the record books on countries’ fiscal stability. At worst … well, let’s not go there. And if indeed we don’t want to arrive there, Washington had best get serious about ways to avoid it. Harry Reid didn’t want to “waste time” on Cut, Cap, and Balance, but maybe now his colleagues in the Senate will see fit to clear their crowded recess calendars and give it the consideration it deserves.0 Comments | Post a Comment | Sign up for NTU Action Alerts
5 Things Washington Could Do to Jumpstart Job Creation
The debt ceiling debate has come to a merciful (if not ideal) come to an end. What is President Obama to do now? Why, pivot to jobs of course.
Sadly, it didn’t take a crack political mind, insider sources, or ESP to figure out what the White House was planning, you just have to look at history. A pivot to job creation has become Democrats go-to move. In fact, Ben Smith of Politico has identified at least six-other times that the Obama Administration has announced a similar shift.
Despite all the claims of a “laser-like focus” on jobs, the White House has never actually gotten around to it. Instead, apparently unable to walk and chew gum at the same time, he is consistently sidetracked by other things. But after more than two years and seven pivots Americans should begin to wonder whether it is truly an inability to multitask or whether it is simply that the Obama Administration has no idea how to promote job creation in the first place. It is almost as if he opened his Keynesian bag of tricks to discover it contained only one trick – stimulus.
So while the Administration pivots themselves in circles, here are several actions that Washington could pursue to create the environment needed for job growth:
These few simple ideas, many of which have already passed the House of Representatives, would provide an immediate spark to our economy. If only the Obama Administration would stop pivoting and start focusing on such policies perhaps America could escape its prolonged economic malaise.0 Comments | Post a Comment | Sign up for NTU Action Alerts
It's been a crazy week in Washington, but it just got substantially crazier. I'm sitting at my desk plugging away at some work when my email starts blowing up with details of a new debt ceiling plan being floated by Senator Mitch McConnell (R-KY), the Minority Leader. It's a doozy, but the basic breakdown is this: the President would be authorized to request from Congress three separate debt ceiling increases of between $700-$900 billion each. He would be required to submit a plan for an equivalent amount of spending reductions. Congress would then be given a chance to "veto" this package by voting on what's called a "Resolution of Disapproval." If that resolution failed, then the President would have his debt ceiling hike alongside a toothless set of spending reduction ideas. Even if the disapproval passed, he could then veto the resolution meaning that a two-thirds majority of Congress would have to override his veto in order to have the disapproval stand.
So what does that mean in reality? It means the President gets his debt ceiling increase, lock, stock, and barrel, unless a miracle occurs and two-thirds of Congress (AKA every Republican in the House and 50 Democrats along with every Republican in the Senate and 20 Democrats) engage in a sudden burst of bipartisanship and override his veto. True, the plan requires the President to submit a plan to reduce spending by an equivalent amount, but a plan isn't the same as actually cutting spending. Congress would have to actually incorporate those spending reductions into future bills, and the whole reason we have the debt ceiling impasse right now is that they can't agree on what spending reductions to include in future bills.
This is a point that appears to have been missed by some. There are otherwise-solid conservative legislators and activists who have said nice things about the plan because it appears to put the debt ceiling onus directly on the President. But, let me repeat, it does NOT force any cuts in spending. It contains nothing in the way of Congressional fast-track authority, the way several "spending commission" proposals that preceded the President's Fiscal Commission executive order did. Unless I'm missing something (which is always possible), I don't see a single thing that actually requires a spending cut, just a requirement that the President identify a list of spending cuts.
People smarter than I am have also raised real constitutional questions about this plan, as it essentially reverses the legislative process by allowing the President to propose something and Congress to veto that proposal. There is something of a precedent with the Congressional Review Act, which was established to allow Congress to modify or eliminate regulations proposed by executive agencies, but that's a much narrower case where Congress has delegated its legislative authorities relating to regulatory issues. This, on the other hand, strikes right at the heart of Congress' proper authority to determine levels of spending and borrowing as defined in Article I, Section 8 of the Constitution. It also bears a resemblance to the line-item veto debate of the 1990s, where a proposal was ruled unconstitutional because it allowed for the President to implement a set of policies not with Congress' APPROVAL, but simply by its lack of DISAPPROVAL.
Beyond all of the technical issues (which are substantial and important), it strikes me as a classic case of being worried about politics over policy. The reason this proposal was drafted in this way is because it would lay responsibility for raising the debt ceiling at the feet of the President. Of course, in shifting slightly more of the "blame" on to Obama (by the way, I think it can be argued that he already will bear most of the public responsibility for hiking the debt ceiling), it grants him a huge increase in the debt limit without including any kind of enforceable reforms to spending now or in the future. That might be a cutesy way to damage the President politically, but it's absolutely horrible if your actual goal in this whole debate is to address Washington's overspending problem.
The solution to our debt disaster is not some complicated form of legislative Jiu Jitsu, it's "Cut, Cap, and Balance." Cutting spending in the short-term will address our deficit, establishing a strong statutory spending cap will put us on a glide path to balance in the medium-term, and the passage and submission to the states of a strong Balanced Budget Amendment will provide a real long-term constraint on a Congress that has proven incapable of fiscal discipline.5 Comments | Post a Comment | Sign up for NTU Action Alerts
Unemployment Continues its Upward Trend
The June unemployment rate reached 9.2 percent according to a report released today by the U.S. Bureau of Labor statistics. And we thought May was bad!
Sadly, after yet another bad month we can put to bed the notion that this negative hiring trend is a fluke. With only 18,000 jobs added, Americans are still waiting around for that promised “Recovery Summer.” Instead, American workers continue to face one of the most dismal employment situations in history, led by a President that appears out of his league. In Wednesday’s Twitter Town Hall the President said,
“I think even I did not realize the magnitude, because most economists didn’t realize the magnitude of the recession until fairly far into it . . . And so I think people may not have been prepared for how long this was going to take and why we were going to have to make some very difficult decisions and choices. And I take responsibility for that, because setting people’s expectations is party of how you end up being able to respond well.”
Mr. President, I don’t think expectations are the main problem here. Just a wild guess, but I bet it has something to do with the sluggish recovery in the face of having spent nearly $1 billion in taxpayer money to fix it.
Our President looks downright grounded compared to his top adviser, David Plouffe, who suggested today that the average American isn’t worried about unemployment rates:
“The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers. People won’t vote based on the unemployment rate, they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?” said David Plouffe, a chief advisor to Obama.
Americans disagree. The top issues in January-May were unemployment and the economy according to a recent Gallup survey. Job seekers are desperately in need of an island of good news in a sea of dismal economic conditions. Thus far, they haven’t been able to find it. And frankly, with the President’s recently stated goal of raising taxes, it doesn’t look like the storm clouds are abating anytime soon.
But there is a way out. Conservatives have tossed America a lifejacket in the form of Cut, Cap and Balance – a comprehensive plan to reduce spending immediately and permanently. The persistent threat of new regulations, higher taxes, and worst of all, default is keeping our recovery at bay. Only by working towards a balanced budget will we unlock the true potential of America’s economic engine and make headway against our staggering unemployment problem.
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Pundits can talk your ear off about what they think, politicians can endlessly tell you how their plans will fix things, and professors can give you their views on what they feel is necessary. Luckily there are real numbers to compare these groups, and their claims, with reality. Economic indicators and statistics can be manipulated to fit arguments and talking points but you’ll always find similarities. Factors such as GDP (Gross Domestic Product) and average income always has the US on the positive side of the scale, while countries like North Korea almost always fall on the failing, or at best struggling, side of global economic comparisons. The difference? Americans can do what they wish, when they want, and in a way they so choose. North Koreas are told how to act, what to say, and even how to think. Americans have significantly more freedoms than, say, North Koreans. This has been our publicized “secret to success.” Here’s hoping more people understand that the more thick the U.S. Code gets with minute instructions and limits to how we handle our money, and thereby our ideas and rights, the thinner our achievements will be in long-term economic development and happiness.
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The fix is in, my friends. Speculation on Capitol Hill runs rampant that House Leadership is actively undermining the prospects for passage of a Balanced Budget Amendment to our Constitution, effectively eliminating the most powerful tool we have to enforce budgeting discipline into the future. While all 47 Senate Republicans co-sponsored a strong BBA that included a spending limit and a supermajority threshold for tax increases, House Leadership has been either ambivalent or subtly hostile towards real structural budget reform. In interviews, House Speaker John Boehner (R-OH) has said he isn't interested in "gimmicks," which many regarded as a backhanded comment about a BBA or a statutory spending cap.
This bad-mouthing seems to be working. The National Journal surveyed Members of Congress about what they expected from a debt ceiling agreement and only 39% of Republicans thought a BBA would be a part of the deal. For some perspective a recent poll found that 81% of Republican voters support a BBA, so I think it's safe to say that elected Rs appear to not be reflecting the will of their constituents very well.
And now word is leaking that Republican House leaders seem to be rushing through a BBA not in order to actually pass it, but to give it a speedy euthanasia and get it out of their hair. Just this morning, I received an email from a House staffer who said "Leadership is planning on bringing H.J. Res. 1 to the floor for a vote sometime over the next two weeks to delegitimize the BBA and separate it from the debt ceiling vote."
H.J. Res. 1 is the version of a BBA that was sped through a House Judiciary Committee markup last Friday with little notice. NTU has been advocating for a BBA for 40 years and I was one of just three people invited to personally testify in its favor at a House Judiciary Subcommittee on the Constitution hearing last month, yet I heard NOTHING about the proposed markup until the morning it was occurring. That's not how a leadership team that's trying to build support for something operates, it's how you try to sneak something through quickly without a lot of scrutiny.
What's so peculiar about this turn of events is that a BBA is not some controversial too-conservative provision toxic to moderate Members' reelection prospects. This isn't, for example, Medicare reform, where dozens of Republican members had to swallow hard and cast the right vote in support knowing that Democrats would demagogue the issue mercilessly. Simply stated, NOBODY will have to "walk the plank" to vote for a BBA knowing that attack ads await them on the other side. It's a rare combination of good politics AND good policy, yet some Republicans are trying to kill it.
The next few weeks will tell you all you need to know about whether or not Republican leaders actually heard the message that was sent last November. Rushing a Balanced Budget Amendment through without allowing grassroots BBA supporters across the country to weigh in and build support would be a pretty clear indication of their true colors. If leaders in the House of Representatives schedule a vote on the Balanced Budget Amendment in the month of June, I'd consider it the equivalent of a big middle finger to the millions of fiscal conservatives who helped create the majority they now enjoy.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Where's the Growth? Weak First Quarter Numbers Show Continued Stagnation
President Obama loves to use the car metaphor when describing the economy. You’ve surely heard it by now. Republicans drove the car into the ditch, the President and Democrats have been trying to push it out, but Republicans have just sat in the back seat (or in an oddly detailed alternative version, stood around sipping on Slurpees) and refused to do any of the hard work.
Just as our economic car appeared to be out of the ditch and ready to hit the road, it appears our engine has stalled out (apparently Obama can’t drive a stick). Despite the Administration’s insistence that we are constantly on the verge of turning the corner, the recently released first quarter GDP numbers appear to tell a different story.
According to the Commerce Department the economy grew at a measly 1.8 percent rate through the first three months. That number is also a rather dramatic step back from the 3.1 percent rate of GDP growth in the last three months of 2010. More bad news came from the Department of Labor, which reported that 10,000 more Americans had filed for unemployment in the last week, raising the total number to 424,000.
A recent George Will column points to the utter lack of progress being made with President Obama behind the wheel.
June will be the 68th month since 1948 with the rate at 8 percent or higher -- the 29th such month under Obama. So 43 percent of the most severe unemployment in the last 63 years has occurred in the last 21/2 years. No postwar president has sought re-election with 8 percent unemployment.
In 1960, candidate John Kennedy's mantra was, "I think we can do better." In 2012, a Republican can win by re-casting that as a question: "Is this the best we can do?"
Congressional Republicans aren’t waiting around until 2012 to ask that question. Last week they issued a no-cost jobs plan that would enact some much-needed reforms to jumpstart our economy. Among them:
America certainly needs a President who can steer us back to prosperity, but until then Congress must free up job creators to put their foot on the gas.0 Comments | Post a Comment | Sign up for NTU Action Alerts
For your consideration, the Atlas Network -- an organization connecting and assisting free-market groups on an international scale -- has produced The Morality of Profit. The video features Executive Vice President Tom Palmer asking whether profits are stolen from other people or are created through value generation. Centering on Bill Gates, we are asked if the concept of “giving back” is accurate after making voluntary transactions that are beneficial to both parties. People paid a few hundred dollars for a product that greatly increased connectivity, accuracy, and efficiency.
Amidst a continuing recession (or at least continuing unemployment and problems with liquidity), the government continues to ask business leaders for more tax revenue and slices of economic freedom for status quo results. Most recently, CEOs from top oil companies were questioned by the Senate Finance Committee on their finances. Little was said about the 1.5 million people employed by the petroleum industry or how narrow the profit margin is in the oil business. Tax dollar-hungry Senators like Jay Rockefeller of West Virginia said the leaders and to a degree their companies are out of touch with regular Americans and, seemingly as a result, they ought to give more money to a system literally out of cash.0 Comments | Post a Comment | Sign up for NTU Action Alerts