Democratic presidential candidate Barack Obama has unveiled an economic package he calls his "competitiveness agenda" and, while he deserves high marks for ambitious solutions to the problems he sees, the actual proposals merit considerable skepticism.
He proposes spending $15 billion a year over 10 years on alternative energy projects — wind, clean coal, alternative fuels, perhaps nuclear power. The government has tried this before, although not on this scale, with little to show for it. Anybody remember oil shale? Years of government-backed research into high-capacity batteries and fuel cells have yet to produce a viable vehicle. In any case, the U.S. economy is peculiarly resistant to command-based government intervention under "industrial policy" or any other guise.
And he proposes a $60 billion "infrastructure reinvestment bank" to underwrite transportation and power projects that — and this should be a red flag — presumably haven’t been able to attract private or state and local government funding. Obama is intrigued by high-speed rail but so have many others only to be daunted when the cost in dollars and disruption is calculated.
He would pay for this through a cap on greenhouse gas emissions and an auction of tradable pollution permits. Both the Senate and House have looked at this and backed away out of justified concern for the damage cap-and-trade might do to the economy.
And how would we pay for this? Basically, we wouldn’t.
Obama would extend the Bush tax cuts for everybody except those earning more than $250,000. He would eliminate income taxes for people over 65 earning less than $50,000 and give up to $1,000 in tax cuts for families earning up to $75,000.
On the other hand, he would raise the capital gains tax and he would reduce corporate tax breaks and close loopholes in the tax code, easy enough to say on the campaign trail but a far tougher proposition when it gets to Congress, the source of the tax breaks and loopholes.
The nonpartisan Tax Policy Center says Obama’s tax proposals would reduce federal revenues by $2.7 trillion over 10 years — when the government is already running $400 billion a year in the red — and that was before he raised the possibility of a cut in corporate taxes.
But what are campaigns for if not to dream big dreams and make big promises?