THE FOUR HORSEMEN OF OBAMANOMICS
November 26, 2008
A look at Barack Obama's platform suggests that he plans four big changes that, if implemented, could have terrible economic consequences. Think of them as the Four Horsemen of Obamanomics, says Kevin Hassett, a senior fellow and the director of economic policy studies at American Enterprise Institute.
The First Horseman is the "Fair Currency Act," that Obama co-sponsored last May. If this bill becomes law, it could ignite a trade war similar to the Smoot-Hawley catastrophe that contributed to the Great Depression:
- The bill allows the United States to impose duties on imported Chinese products to offset China's purported currency manipulation.
- Imposing new duties on these products, according to the bill's supporters, would "level the playing field" and would restore the competitive position of American manufacturers in the global marketplace.
- But such "protection" is never the end of the story; if we impose duties, others will respond in kind, and trade will suffer.
The Second Horseman is "card check," which allows union organizers to form a bargaining unit once they receive signed authorization forms, or "cards," from a majority of employees:
- By taking away the option of a secret-ballot election, card check would make it easier for union bosses to intimidate workers into acquiescence.
- But consider, also, the impact of further unionization on businesses: Costs would skyrocket, profits would tank, and bankruptcies and job destruction would follow.
The Third Horseman is tax policy; the most alarming of his proposals:
- He plans to increase marginal tax rates on the "wealthy," and a little-known footnote to his plan was a call to end the deferral of tax on the profits of U.S. multinational corporations.
- If Obama successfully ends deferral, our multinationals will suddenly find that costs have dramatically shifted in their disfavor.
- They will lose business to competitors that operate in low-tax jurisdictions, and cut back employment both here and abroad.
The Fourth Horseman is regulation:
- As a candidate, Obama blamed deregulation for our economy's woes, and promised to crack down with new regulations if elected.
- But one can bet that Obama's efforts will not focus solely on the financial sector, and that many new costs will be imposed on American businesses generally.
Source: Kevin A. Hassett, "The Four Horsemen of Barack Obama," National Review/American Enterprise Institute, December 2008.
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