Economy & Budget

Obama Isn’t Giving Businesses What They Need

As a former Governor of Virginia, I want to strike a new blow in the debate over the evolving economic policies of the U.S.  From my state experience, it’s clear that the Obama administration and his allies in the Congress are moving the U.S. in the exact opposite direction of what is needed to pull us out of this recession.  If we keep going in Obama’s direction, we will have disastrous consequences, the full extent of which cannot be foreseen.    
    
During my term as governor, I emphasized building the economy and empowering our citizens to get good jobs.  As a result, we added almost 250,000 new jobs to Virginia, and it wasn’t done by raising taxes.  New businesses and companies considering moving to Virginia or other states wanted stability and assurance that Virginia was a good place to do business.  Special tax districts were created, and tax breaks were given conditioned on job creation and investment, not just giving away money.  Not only did Virginia benefit, but so did the federal government, which took the lion’s share of new income taxes from new Virginia taxpayers.      

New businesses wanted to know that education for their workers and the children of their employees would be top flight.  Grants were made to colleges during my administration to permit the reduction of tuition by 20%, and standards of learning were implemented for K-12 schools.  We reduced the car tax, which was a giant burden on people driving to and from their jobs.  

The other key to success was the control of government spending.  Legislatures actually pass the budget, not governors.  Legislators truly believe they will be re-elected on the basis of high government spending and pork-barrel projects and earmarks.  They will spend the entire budget and always want more. Let’s remember that government spending isn’t free — it comes from taxpayers who need that money to support their families.  In Virginia, we held some of that money away from the legislature by a rainy day reserve and by cutting the car tax and returning state revenue back to the taxpayers through the localities.  Without that tax break, all that money would have simply been spent, creating a higher number of programs to be supported by tax dollars in a downturn.  

This, in fact, occurred after my term in office, with my successors swelling the Virginia budget from $52 billion for a two year budget to $76 billion, a spending amount not sustainable in this downturn.

Contrast my state program with that of President Obama and his lockstep majorities in the U.S. Congress.  The message now being sent into the economy is that high deficit spending is being utilized for expanded government and to re-engineer the society.  A stimulus package of $800 billion is enacted to simply spend money without any promise of job creation. A housing plan of $275 billion is on the way.  A new energy bill is proposed to cost $150 billion, while adding no oil or gas supplies.  Health care is to be reformed to give the federal government more control at a cost of $600 billion.  The deficit is to explode to $1.75 trillion, on a total U.S. budget of $3.6 trillion.  All this is to be funded by increased taxes on families and investors who create the jobs in our society.  The whole program is about wealth redistribution and not job creation.

Some of the stimulus money is going to the states which are thrilled to be able to maintain the status quo by filling in budget gaps.  Some of these grants will actually require the states to initiate or expand social welfare programs that will have to be sustained later by state tax increases when the one-time stimulus money dries up.  Several intrepid governors have foreseen this and expressed reservations about taking this money.  

To counter this, the liberal Congress put in a provision that a state legislature can by-pass the governor and accept the money over his or her objection.  The 10th Amendment to the U.S. Constitution is intended to limit the federal government from encroaching on state processes.  Since this provision only sets down conditions on which the federal money will be granted, there is likely no 10th Amendment violation.  But if the intention is to override state budget processes, executive budget making, legislative passage, and executive veto, this would raise serious 10th Amendment issues.  

So what does all this create?  It creates uncertainty and instability when the American economy is seeking stability and certainty.   The president uses nearly hysterical language to bully through his program.  He seeks to scapegoat his predecessor.  He follows a program of wealth transfers instead of job creation.  He promises higher taxes by allowing the previously enacted tax cuts to expire, starting in 2010.  He promises Ted Kennedy-style health care reform, and has himself promised national health care.  He seeks to limit executive compensation, intervening in decisions properly made by boards of directors.  He even complains about corporate retreats and planes, inflaming the public.  He offers to nationalize the right to conduct industrial activity by a carbon cap and trade regime that licenses economic activity.  He offers a mortgage bailout program that fails to explain why one mortgage payer should be favored over another.  

In truth, Obama and his majorities in Congress are injecting the most extreme economic program in the history of the U.S.  No wonder that after the inauguration, the stock market did not recover on new confidence and hope, but has plummeted another 25%.  Our business community knows, and our citizens know, that we are losing our right to strive, to succeed, and to live our lives in independence and liberty.   

But out of this crisis comes not just danger for the nation, but also opportunity for conservatives.  Who will save the nation if not us?  Conservative leaders of both parties should call for the abandonment of this blind slavish adherence to old 20th century left-wing ideology.  

My own personal experience is that American businesses flee overseas to avoid the high American corporate income tax rate.  If we want jobs, and not just redistribution of wealth, we should cut the corporate income tax to zero.  Save this aimless stimulus bailout money.  A zero corporate income tax would cost $275-$340 billion, about one-third of the stimulus spending.  The result would be an explosion of new capital investment in the U.S., creating millions of new jobs.  Make the tax revenue back from the income tax from those who get the new jobs.  

It is time to inject some stability and an optimistic sense of direction.  Our economic policy, like our energy policy, is going in the exact opposite direction from where we should be going.  It’s time to right the ship.  If we conservatives don’t point the way, who will?


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