Capital Commerce

My friend and superblogger Ross Douthat has been posting about the political appeal of Obama's "spread the wealth" philosophy. My two cents: I am a big believer in creating wealth, as are my fellow Americans. Consider this: During the 1980s, the economy notched 19 quarters of 3.5 percent GDP growth or better. In the 1990s, the economy also notched 19 quarters of 3.5 percent growth or better. So far this decade? Just eight. Or look at the number of quarters of "hypergrowth"—5 percent or better. (This was JFK's GDP goal in the 1960s, by the way.) There were 12 in the '80s, eight in the '90s. So far this decade? Just a single quarter, the third quarter of 2003.

When people think true prosperity is unattainable, then they will settle for mere alleviation of their misery. As JFK said in 1961: "The potential of the American economy is constantly expanding. The labor force is rising by 1.5 percent per year. Output per man rises annually by 2 percent as a result of new and better plants and equipment, modern technology, and improved human skills. These increases in manpower and productivity provide the base for a potential annual growth of 3.5 percent in the nation's total output. This is not high enough. Our potential growth rate can and should be increased." I agree!

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Alec Phillips over at Goldman Sachs looks for Dems to propose a fiscal stimulus plan in the "$150 billion to $200 billion range, with risk to the high side." A bit smaller if McCain is elected, larger if Obama wins.

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John McCain's lack of a clear and obvious middle-class tax cut is befuddling to economic conservatives. Here, courtesy of First Read, is a bit from a town hall meeting on a college campus when McCain was running for the GOP nomination eight years ago: "I think middle-income Americans, working Americans, when the account and payroll taxes, sales taxes, mortgage pay—all of the taxes that working Americans pay, I think they—you would think that they also deserve significant relief, in my view. I think the first people who deserve a tax cut are working Americans with children that need to educate their children, and they're the ones that I would support tax cuts for first."

Me: 1) McCain has failed to explain why his corporate tax cut is actually a wage-booster for workers. 2) McCain has failed to steal a clever idea from Mitt Romney and apply a zero capital-gains rate for 401(k) nation. 3) McCain failed to offer a big tax idea like a dual-rate tax system—25 percent and 15 percent—or even a flat tax. I recently drove from D.C. to West Virginia, and I saw this sign over and over on the side of the highway: "Obama. Lower Taxes." I think that explains McCain's 10-point deficit, yes?

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What does Barack Obama believe about taxes and how they affect economic growth? It would be nice to know since a) he is proposing raising taxes on some incomes, investments, and small businesses right into the teeth of a downturn, b) if elected, he will be working with a Democrat-dominated Congress that has in the past proposed a variety of tax increases, including a "millionaire surtax."

What would a President Obama do? In that context, I think this quote from his book The Audacity of Hope is most illustrative: "The high marginal tax rates that existed when Reagan took office may not have curbed incentives to work or invest, but they did distort investment decisions—and did lead to the wasteful industry of setting up tax shelters."

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