A few thoughts on Thursday's Democratic presidential forum at Howard University, here in steamy Washington, D.C.:
1) What happened to Bill Richardson? I mean, the New Mexico governor came into the race as a supposedly "different kind" of Democrat with a reputation as a pro-growth tax cutter back in his home state. And to be sure, he still throws around all the right buzzwords, as in this hunk from the debate: "We need to rebuild this economy by being pro-growth Democrats. We should be the party of innovation, of entrepreneurship, of building capital, getting capital for African-American small businesses."
That came right out of a 1988 Jack Kemp presidential campaign speech. But then Richardson veers into pure 1988 Mario Cuomo. For instance, he wants to raise taxes on wealthier Americans, as do his rivals. And as we found out in his answer to a question about outsourcing, Richardson is also, apparently, a believer in "an industrial policy where we invest in high-growth industries, in health industries, in high-tech, in renewable energy, to keep those jobs here."
Maybe he could make a government-directed industrial policy work, but government's track record doing that sort of thing is terrible. Venture capitalists have a tough enough time identifying future winners—do you think government bureaucrats or the commerce secretary could do a better job? Democrats used to point to Japan as a paragon of successful industrial policy, but its economy has been in a two-decade funk, and the latest academic thinking on its efforts to manage industry back in the 1970s and 1980s is that the policies were a failure.
2) Richardson, like all the other Democrats, agreed that outsourcing is bad. There was no mention that outsourcing affects, according to the best studies to date, maybe two-tenths of 1 percent of the U.S. workforce. No mention that it has helped keep inflation and interest rates low, boosting the real take-home pay and buying power of millions of workers here. And no mention that there is really nothing that government can do about outsourcing—save the most draconian protectionist measures—even if it was a good idea to do something about. The one idea that the Democratic candidates had to combat outsourcing was, as John Edwards put it, "eliminate all tax breaks for companies who are taking their jobs overseas and getting a tax break for doing it." Hillary Clinton and Barack Obama both said pretty much the same thing.
What they were referring to is the tax incentive for U.S. corporations to not repatriate profits that they make overseas because America has the second-highest corporate tax rate in the world. Instead, multinationals keep that dough overseas, perhaps investing in factories or call centers or research labs in other countries. But even if companies were taxed on their foreign income right away, there would still be an incentive to outsource because of the wage differential or merely to take advantage of local talent. As Joe Biden said, "The bottom line here is that eliminating the tax breaks is not going to keep jobs here in America. We've got to make it more attractive to have jobs here in America and for corporations to be here." Biden suggested that we need to create more technologically savvy workers. Another option is cutting U.S. corporate tax rates to help make America more competitive with our lower-tax competitors.