Obamanations on Defense & the Economy

This is an undated video with Obama's plan for a real minimizing of our defensive capabilities. Coupled with his plans to chat over tea with Iran, Obama portends to be a disaster not only to America's national security, but to its ability to defend itself. (H/T Powerline)

And there is this from WSJ on Obama's plan to "end the tax breaks for companies who ship our jobs overseas, and we will give those breaks to companies who create good jobs with decent wages right here in America." It reads like a blueprint to unionize all major businesses in America and it demonstrates no understanding of economics:

Mr. Obama's proposal would designate certain companies as "patriot employers" and favor them over other, presumably not so patriotic, businesses.

The legislation takes four pages to define "patriotic" companies as those that: "pay at least 60 percent of each employee's health care premiums"; have a position of "neutrality in employee [union] organizing drives"; "maintain or increase the number of full-time workers in the United States relative to the number of full-time workers outside of the United States"; pay a salary to each employee "not less than an amount equal to the federal poverty level"; and provide a pension plan.

In other words, a patriotic employer is one which fulfills the fondest Big Labor agenda, regardless of the competitive implications. The proposal ignores the marketplace reality that businesses hire a work force they can afford to pay and still make money. Coercing companies into raising wages and benefits above market rates may only lead to fewer workers getting hired in the first place.

Under Mr. Obama's plan, "patriot employers" qualify for a 1% tax credit on their profits. To finance this tax break, American companies with subsidiaries abroad would have to pay the U.S. corporate tax on profits earned abroad, rather than the corporate tax of the host country where they are earned. Since the U.S. corporate tax rate is 35%, while most of the world has a lower rate, this amounts to a big tax increase on earnings owned abroad.

Put another way, U.S. companies would suddenly have to pay a higher tax rate than their Chinese, Japanese and European competitors. According to research by Peter Merrill, an international tax expert at PriceWaterhouseCoopers, this change would "raise the cost of capital of U.S. multinationals and cause them to lose market share to foreign rivals." Apparently Mr. Obama believes that by making U.S. companies less profitable and less competitive world-wide, they will somehow be able to create more jobs in America.

He has it backwards: The offshore activities of U.S. companies tend to increase rather than reduce domestic business. A 2005 National Bureau of Economic Research study by economists from Harvard and the University of Michigan found that more foreign investment by U.S. companies leads to greater domestic investment, and that U.S. firms' hiring of more offshore workers is positively, not negatively, associated with the number of American workers they hire. That's in part because often what is produced overseas by subsidiaries are component parts to final, higher-value-added products manufactured here.

Mr. Obama is also proposing to raise tax rates on affluent individuals, as well as on capital gains and dividends. This would also lead to more capital and jobs leaving the U.S. The after-tax return on U.S. investment would fall appreciably if these tax hikes were adopted, and no amount of tax-credit subsidy will keep capital from fleeing to lower tax jurisdictions.

If the U.S. didn't impose the second highest corporate income tax rate in the world, companies would have less incentive to move jobs overseas. Rather than giving politically correct companies a 1% tax credit, it makes more sense to reduce the U.S. corporate tax rate for everyone -- by at least 10 percentage points to the global average.

Economists have long understood that companies don't really pay taxes; they merely collect them. A study by the American Enterprise Institute has shown that U.S. workers bear the cost of the corporate income tax in lower wages and salaries. To borrow Mr. Obama's language, what's really unpatriotic is the 35% U.S. corporate tax rate.

Read the entire article.

Obama scares me. His presidency would yank our nation deep into socialism, reduce our defense, and see an explosion of radical Islam. We are at a crucial moment in history. There was only so much damage a Jimmy Carter presidency could do, occurring when it did. Obama portends to be far worse than Carter, and his candidacy comes about at a time when he really could drive America into a second-class state.