I’m a bit of a history buff — not a historian on the level of a Doris Kearns Goodwin or even a Newt Gingrich, but a curious explorer of history nonetheless. One fascinating figure is Aethelred (or Edward) the Unready, one of the pre-Norman kings of England, whose name belies his reputation, thanks to an imperfect translation of Old English. The names Aethelred and Edward both mean “wise counselor” or “wise guardian,” but Aethelred was not considered wise, or inclined to follow good counsel. He acted rashly with bad consequences according to chronicles after his reign (which have recently come under scrutiny, it should be noted), earning him the sobriquet of someone who “recks not his own rede,” or council — and hence “un-rede-y,” or unready as it comes to us now. The nickname is a critical play on words, meaning that Aethelred was most un-Aethelredy as king.
The reason that bit of history comes to mind is Barack Obama’s new corporate-tax reform plan, which I first noted yesterday. As Jim Pethokouis noted and I pointed out, the plan actually contradicts the advice from Obama’s own Jobs Council, which warned that the US needed to go with a territorial approach to corporate taxes in order to compete with our trading partners. Instead of following the advice of his own panel, Obama went in the opposite direction.
We’ll get back to that in a minute. As it happens, Mitt Romney released his revamped tax plan yesterday, which simplifies his economic approach and provides a stark contrast between Republican economics and Obama’s reliance on gimmicks to fund his hobby horses. I compare the two plans in my column today for The Fiscal Times:
Both Obama and Romney propose lowering the corporate tax rate from its current world-highest 35 percent, Obama to 28 percent, Romney to 25 percent . Obama’s rate change doesn’t change the competitive position of the US by much; with combined state and federal taxes, we would go from the first-highest tax burden on business to fourth. On top of that, though, Obama proposes to close enough “loopholes” to increase tax revenues from corporations by $250 billion – increased costs that businesses would pass onto consumers and workers in the form of higher prices and lower wages. Obama also wants to do what almost no other nation does, which is impose a tax on profits earned overseas. Obama’s “global minimum tax” is based on his notion of fairness, and it goes against the advice of Obama’s own Jobs Council, called into being last year for Obama to claim that he was focused like a laser on job creation, as well as Obama’s own deficit commission …
Where will the money go? According to an analysis by Pethokoukis, part of it funds a decrease in the corporate tax rate for manufacturers to 25 percent. Much of it will fund more of Obama’s new stimulus plans for “clean energy,” a boondoggle that so far has produced bankruptcies and massive taxpayer losses at Solyndra and other Obama-favored green-tech firms. Instead of making American companies more competitive on the world stage and encouraging more investment at home, Obama’s plan shakes down businesses to generate another slush fund for more gimmicky interventions.
Contrast that with Romney’s approach. His plan also lowers the corporate tax rate and closes some tax breaks, but it also reforms the US corporate tax to a territorial system that matches the approach of our partners. That would allow American companies to bring profits back to the US without a tax penalty, allowing for investment in our own economy. The decreased costs would also make American companies more competitive overseas, and the simpler tax code puts smaller businesses at less of a disadvantage in compliance efforts. Elimination of the corporate AMT, with its rules on depreciation costs, would spur more capital investment by corporations, providing even more of an economic boost.
The contrast between the two plans could not be more plain. Romney provides a path to a high-growth economy by simplifying taxes and allowing people to keep more of what they earn, and spend it more freely. Obama’s plan seizes more capital from businesses so that he and his team can choose where investment goes and who benefits from it, rather than focus on growth and prosperity.
Romney’s plan is actually very good — aggressively cutting taxes and applying supply-side, pro-growth policies. It puts Romney at least into the same class as Newt Gingrich and Rick Santorum, with a lot less complication to get in the way of the message. Pethokoukis considers it Reagan-like:
Romney wants to a) slash income tax rates by 20 percent, b) lower corporate tax rates by 30 percent while slashing corporate welfare, c) reform Social Security by gradually raising the retirement age and indexing benefit growth for higher-income retirees to inflation instead of wages, d) create a premium-support Medicare system for younger workers, and e) cut government spending by $500 billion during his first term. If Romney does become the Republican nominee, he would certainly be running on the boldest GOP agenda since Reagan ’80, maybe ever.
It also gives Republicans more of a reason to vote for Romney than against his competition. Romney missed an opportunity to emphasize this in last night’s debate, but he’ll roll it out officially tomorrow in a policy speech in Detroit.
Let’s get back to Obama’s plan. What’s remarkable about it is that Obama has created two outside economic panels in the last two years, and ignored recommendations from both of them. His deficit commission returned a tough and specific plan for shrinking spending and deficits, but Obama produced a budget that spent more and did nothing to restrain entitlement spending. Now his Jobs Council tells Obama how to make the economy grow and create jobs, and Obama does the exact opposite.
Why bother to create these panels at all if Obama isn’t interested in advice? The panels provided him just enough political cover to get by when deficits and jobs became crippling political issues. It’s a form of theater; Oh, look, Obama’s created an expert panel on [fill in the blank]! He must be focused like a laser on that problem! By the time Obama has to actually put a plan in place, he hopes that no one pays attention to what the panels recommended. Instead of listening to the advice of his own counsel, Obama recklessly plans on his tax-and-spending spree to fund his expansive view of government and its power to dictate outcomes in American lives.
Obama and Aethelred have much in common, including disastrous results.
Update: Keith Hennessey notes that one Obama pledge turned out to be vaporware:
The President’s Buffett Rule is vaporware. … The President has not actually proposed a tax policy that fits this principle. Neither his budget nor the tax proposals released by Treasury include any policy specifics to establish a new minimum 30% tax rate for those with income > $1M. …
When you call on Congress to enact a policy that you describe only as a principle, you generally send Treasury officials to engage with the chairs of the tax writing committees to help draft legislation. Other than the President’s public comments I can find no evidence that the Administration is actually trying to get Congress to enact the Buffett Rule in legislation. The logical explanation is that President Obama wants Congress not to act so that he has a rhetorical weapon to use against Republicans in an election year.
Administration officials appear to be describing a policy that would replace the Alternative Minimum Tax, yet their budget also contains no proposal to repeal or replace the AMT.
And yet the President is calling on Congress to enact his vaporware proposal today.
Hey, he’s too busy coming up with the bold plans to actually put them into action.