Obama on Inequality, Government, Business and Growth

Barry, My Liege :

We thank you for your frank acknowledgment in last week's address of the crippling income and wealth inequalities in the United States of America today. We especially thank you for the recognition that those inequalities undermine our efforts to promote the economic growth you recognize as necessary for our prosperous future.

Here is a link to a transcript of your remarks before the Center for American Progress :

http://www.whitehouse.gov/photos-and-video/video/2013/12/04/president-obama-speaks-economic-mobility

But, My Liege, this space takes issue with some of the proscriptions inherent in your assessment of the correct policies for ensuring growth.

You say we can assure growth by " ... simplifying our corporate tax code in a way that closes wasteful loopholes and ends incentives to ship jobs overseas. And by broadening the base, we can actually lower rates to encourage more companies to hire here and use some of the money we save to create good jobs rebuilding our roads and our bridges and our airports, and all the infrastructure our businesses need... “

Your remarks contain an assumption that lower costs to businesses through lower tax rates will incentivize businesses to make investments and to hire more people. My Liege, this canard is taken directly from Ronald Reagan's discredited Supply Side economics.

That is not correct.

Businesses invest in job creating activities when - and only when - they believe that their investments will make a profit in the future. Lowering tax rates today in the hopes of creating investment in the future is simply stupid.

The single best way to incentivize business is to raise the wages of average American workers so we can afford to buy things.

Henry Ford knew that. Business leaders today know it. They won't publicly admit to it because such an admission might jeopardize some future short term profits; but, be clear My Liege: they are not stupid.

You continue with discredited Supply Side economics with this statement about growth: " It means a trade agenda that grows exports and works for the middle class. It means streamlining regulations that are outdated or unnecessary or too costly. And it means coming together around a responsible budget -- one that grows our economy faster right now and shrinks our long-term deficits, one that unwinds the harmful sequester cuts that haven't made a lot of sense -- (applause) -- and then frees up resources to invest in things like the scientific research that's always unleashed new innovation and new industries."

Our trade policies must protect American jobs at middle class wages. This will mean imposing higher tariffs on some imports when those imports destroy American jobs. This is especially true when the imports come from factories owned by American corporations who outsource jobs to low wage countries.

Regarding the debt we accumulate, John Keynes had it correct that borrowing can and should be used to stimulate the economy when the economy is in recession. Borrowing becomes a problem when the annual debt service as a percentage of GDP or the Federal Budget increases beyond today's range. And, my Liege, the biggest danger of that occurring comes from Republican refusal to conduct the basic fiscal policies of our country with minimal professionalism - it is not good to frighten Treasury Bill investors with the specter of a dysfunctional government. T-Bill purchasers are not frightened by the size of the debt.

We pray you will look more closely at your policy proscriptions in the cold light of day and not the dark light of a cocktail mixer.

Your faithful servant,