If the Republican gains in the 2010 midterm elections were a shellacking as President Obama so aptly labeled it, what term best applies to the Republican surge in the midterm election we just had?
But our President could save his presidency and clinch his legacy—and help millions of unemployed Americans—by doing something that, perhaps, only a liberal Democrat could do: President Obama oughta get in bed with business.
Just as President Nixon, a conservative Republican, pulled off an embrace of China, a move that would have gotten a Dem pilloried for being weak, so could President Obama, the bloodied but unbowed progressive, reach out to Republicans’ base: business. Here are eight things O could do to embrace business, stoke economic growth and steal the march on Republicans before they have a chance to make their own pitch:
- Cut the federal tax on U.S. companies’ overseas cash to just 5% from almost 40%. The U.S. is the only major economy to double-tax the leftover profits that companies bring home; they earned the money overseas and already paid local taxes on those earnings. Rather than give up hundreds of billions of dollars to U.S. taxes, the companies leave the cash overseas—some $1.7 trillion right now. Slash that tax and firms would bring home a trillion dollars, a huge stimulus plan without spending one single taxpayer dollar. Cisco CEO John Chambers has told me this in the past, and it’s even truer today.
- Set a new search-and-destroy mission for the most costly but only marginally beneficial regulations. Inspect all rules that cost the economy $100 million a year or more: Some 191 new rules coming into place this year are at that level or higher. Last year, we added more than 26,000 new pages of regs to the Federal Register, covering more than 6,000 new rules; that swelled the register to almost 80,000 pages. The annual cost of all regulation is near $2 trillion in our $17 trillion economy. That’s too high: It’s the size of the entire economies of Australia, Canada or Italy.
- Lead the way on tax reform by ripping off my old boss, Steve Forbes, and proposing a simple, three-tier flat tax for personal income that would eliminate most tax breaks for the rich. Slash corporate income tax rates in half—they are the highest in the world. Restore lower taxes on investment gains and dividend payments, and pass new tax breaks for companies that pay out stock to all workers. This litany would stimulate the economy and bring in more in taxes, not less.
- Pass new tax breaks for businesses that open new sites in depressed inner-city neighborhoods. Let them run ten years without having to pay any income tax to federal, state or local governments. Let their workers who live in those areas also go ten years tax-free. Art Laffer, the father of supply-side economics, porposes this plan.
- Set up tax breaks for training new hires in new skills and advanced technology, letting companies pocket accelerated profits. Let them deduct twice the cost of training a new worker and three times the cost when that worker has been hired off the welfare rolls.
- Adopt new tax credits for unemployed middle-income and lower-income people that basically offer them cash tax rebates to fund their moving to new markets to find better work. In the Great Recession, the mobility of the work force stalled as many unemployed workers in underwater-mortgage homes couldn’t afford to move elsewhere in search of new jobs. That created labor shortages in some regions and in some fields; make it easier for jobless workers to move and you solve problems for employees and employers alike.
- Eliminate the growth-sapping Medicare tax that hurts one of the most innovative, thriving, made-in-the-USA industries we have: medical equipment. The new tax seizes 2.3% of the REVENUES of makers of MRI scanners and other state-of-the-art gear. Usually, taxes apply only to the profit left over after companies cover their costs of making and selling whatever they provide. This tax sops up much of the profit growth at smaller firms. Kill it.
- Approve the KeystoneXL pipeline so the crude that gets fracked in Canada can safely travel to U.S. refineries. This would put you, Mr. President, on the right side of the US energy boom that is a major fulcrum of our economy for the decades ahead. Yet it wouldn’t increase greenhouse gases at all, so the blow to your green allies and Hollywood pals would be only symbolic. If you worry about safety, set a 1%-of-revenue tax to put money into an escrow fund for long-term reparations when and if they are needed.
Okay, so it’s true that it might be an uncomfortable reach for President Obama to try these eight measures. That last one on the Keystone pipeline might be especially painful given his climate-change crusade, and, admittedly, the President never has been very comfortable with business. In his autobiography, he talks about doing an internship for a firm serving Wall Street and feeling like he was going “behind enemy lines” every day.
But other Presidents have taken a drubbing in the midterm elections, moved back toward the center, and have gone on to get some good things done. See the second terms of Ronald Reagan, Bill Clinton and George W. Bush. President Obama is said to be a really smart guy—certainly smart enough to read history and see the wisdom of making an unexpected move like this. Let’s hope he goes for it.