Obama not hitting his targets

Caroline Baum:

Two weeks ago, President Barack Obama unveiled his $447 billion plan to put Americans back to work.

Eleven days later, he told us how he’d pay for it: $1.5 trillion in tax increases over 10 years and $3 trillion in spending cuts -- on top of the $1 trillion already agreed to in last month’s Budget Control Act.

He outlined the principles of a comprehensive tax reform that would lower rates, broaden the base, cut “inefficient and unfair” tax breaks, encourage job creation and reduce the deficit. In other words, every economist’s dream.

Then he went on to cherry-pick the targeted tax loopholes he wants to close and take aim at high-income earners for tax increases.

Thus did Obama’s tax reform take on a decidedly populist cast. The president’s “Buffett Rule,” an idea without specifics, would ensure that millionaires pay higher taxes than the middle class (as a group, they already do). Obama would let the Bush tax cuts expire for Americans making more than $200,000 a year ($250,000 for households) and limit their itemized deductions, be they for charitable contributions, mortgage or tax-exempt interest, or employer-sponsored health care.

In his quest for fairness, Obama may end up taxing those he wants to help. As the editors at Bloomberg View noted in an editorial this week, the diminished appeal of municipal bonds, if their tax status changed, would raise borrowing costs, leading to higher taxes, reduced services and less money for the state and local infrastructure projects the president loves to tout.

In economics, this is called the law of unintended consequences. Somehow Obama managed to spend 12 years on the law school faculty at the University of Chicago without absorbing any of the school’s free-market zeitgeist.

The president’s plan, or proposal, or whatever you call an outline of lofty goals with few details, is titled, “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.”

The title is misleading, and a more accurate subtitle would be: “The President’s Plan to Spend Now and Pay for It Later.” In an effort to deflect criticism and avoid the appearance of inconsistency -- Obama previously advised against raising taxes when the economy is weak -- the White House website lays out a few facts:

“Fact: The President’s plan does not raise anyone’s taxes in 2011 or 2012.” Instead, “all measures to raise additional revenue -- including fundamental tax reform -- are effective starting in 2013.”

Sound familiar? “Pass this plan now” (the spending part) so we can spend money “without adding a dime to the deficit.” Uh-huh. Any time a politician tells you that, you know he’s flat-out lying.

In the meantime, those inefficient loopholes have to go. Here Obama gets specific, targeting targeted tax breaks for oil and gas companies and for corporate jet owners, more for their symbolic significance than their revenue-generating potential.

By all means, let’s get rid of the deductions and credits for oil and gas producers. The U.S. government shouldn’t be subsidizing these companies. Nor should it subsidize any other companies, including renewable energy producers: companies like the solar-panel manufacturer Solyndra, which filed for bankruptcy two weeks ago and laid off 1,000 employees.

“Obama says he wants successful people and companies to pay more,” says Joe Carson, head of global economic research at AllianceBernstein. “A better strategy is to create more successful companies.”

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There is more.

The good news is that this incoherent plan has no hope of becoming law.  It is just a vehicle for a hopeless campaign to salvage Obama's chances for a second term.  The more desperate he becomes the more ridiculous his proposals are.