H.L. Mencken once said that every decent man is ashamed of the government he lives under.
Indeed, all modern U. S. presidents sit atop a sprawling government bureaucracy that is intimately intertwined in a $15 trillion economy. There are those who believe that this apparatus long ago became far too large and unwieldy and, in the process, began to impede fundamentally the dynamism of unfettered American capitalism. Rep. Ron Paul of Texas can be said to be in this camp, broadly speaking. But that's not the line of attack we've heard repeatedly from Republicans over the past two years. The standard right-wing trope nowadays builds from the premise that at roughly noon on Jan. 20, 2009, something went fundamentally wrong in the conduct of American business. With some variations in nuance, virtually every major Republican officeholder claims to believe that, over the past two-plus years, we've witnessed a sustained and unprecedented attack on those who create wealth and jobs in America.
But in fundamental respects, the record of the Obama presidency contradicts this narrative. Three areas in particular warrant scrutiny in this regard: taxes, Obama's brain trust and regulation. This egregious mischaracterization of Obama's outlook has profound consequences for our nation's well-being.
TAXES: The Tea Party emerged in 2009 in large measure as a response to the presumably onerous tax burden that Obama was going to impose on hard-working Americans. (TEA stands for "taxed enough already." Get it?) But Obama has enacted new tax laws that lowered taxes for at least 95 percent of Americans. These included expansion of existing tax breaks, like the Earned Income Tax Credit, new credits, such as the Making Work Pay credit, and other goodies for individuals across the income spectrum. In the 2010 tax compromise, President Obama also secured a one-time reduction in the employee side of the payroll tax, a cut that applies to all wage earners making under $106,000 a year. During the 2008 campaign, Obama said repeatedly that he would restore the 39.6 percent marginal income tax rate on the highest earning Americans that had existed under President Clinton. But when it came time at the end of 2010 to let expire the putatively temporary top rate of 35 percent enacted into law under President George W. Bush, Obama and the Democratic Congress agreed to put off for at least two years the revocation of the Bush tax cuts for top earners.
Partly as a result of these tax breaks and partly as a consequence of the recession and slow recovery, federal tax receipts as a share of the national economy—one basic way of measuring the overall tax burden—are at their lowest level in 60 years. It's true that health care reform, assuming full implementation beginning in 2014, will be supported in part by some tax increases among high earners. But according to data from the Organization of Economic Cooperation and Development (OECD), the research and policy organization for the world's wealthy countries, effective tax rates in the United States are among the lowest of the 20-plus wealthiest countries that the OECD tracks. And neither health care reform nor any other proposed tax increases to deal with federal deficits would appreciably change that fact.
We've also heard a lot of complaints lately about the 35 percent corporate tax rate. That nominal rate—which hasn't changed under Obama—is among the highest in the industrialized world. But the effective corporate tax rate is far lower—a 2009 study by the World Bank found our effective corporate tax rates to be lower than those in Germany, Canada, India, China, Brazil, Japan and Italy. In fact, plenty of large corporations pay no federal income tax at all in some years. One noteworthy example is General Electric, which reported more than $14 billion in profits in 2010 and paid zero dollars in federal income tax. And GE CEO Jeffrey Immelt was named in January as the chairman of Obama's Council on Jobs and Competitiveness.
If you think taxes were already tyrannical and burdensome under George W. Bush, then feel free to complain that they remain so under Obama. But you cannot reasonably argue that Americans have suffered additional tax injustices under Obama. The record simply doesn't support the claim.
THE BRAIN TRUST: Speaking of Immelt, a look at Obama's inner circle of economic advisers also undermines claims that he has an "anti-business" outlook. In addition to Immelt, in January Obama named J.P. Morgan senior executive William Daley of the legendary Chicago Daley clan as his chief of staff. As you may know, that's a pretty important position. Obama's chief economic adviser during his first two years in office was the eminent economist and former president of Harvard Lawrence Summers. Summers has made millions of dollars in speaking and consulting fees from Wall Street firms in the past decade. As President Clinton's last Treasury secretary, Summers was instrumental in ensuring that derivatives and other newly emergent and exotic financial "products" would be free from regulatory oversight, ushering in the era of high-stakes financial gambling that contributed so much to the financial crisis in 2008. Obama's Treasury secretary Timothy Geithner is, by any reasonable measure, very sympathetic to Wall Street interests. Then there's the revolving door between the administration and Goldman Sachs. This includes, most recently, the appointment of former Clinton adviser Gene Sperling as director of Obama's National Economic Council. Sperling was brought in, in part, to make the regulatory process more agreeable to big business.
Is this really the profile of an administration hell-bent on destroying modern American capitalism?
REGULATION: Republicans have also spent a lot of time complaining about the supposed strangulation of business by new regulations under Obama. It's true that the health care reform law, assuming it survives intact to full implementation beginning in 2014, entails many new rules and regulations governing private health insurance companies. Of course, the main complaint about government regulation is that it undermines choice, efficiency and value, thus stifling innovation in the process. Since private health insurers do not, to put it politely, reliably deliver any of those goods, few Americans will shed tears at the thought of more oversight of that sector. More broadly, recent studies have shown that some of the most significant environmental regulations passed by Congress are languishing in the rules-making process in the administration and are, therefore, in danger of not being implemented at all. These include laws intended to regulate urban storm water runoff and to regulate mountaintop removal mining.
Congress did pass a major financial regulatory bill in 2010, and we can hope that the new Consumer Financial Protection Bureau will help stop practices like the massive mortgage fraud that has victimized so many Americans. But most experts agree that its passage is unlikely to solve the "too-big-to-fail" problem that allowed the biggest financial firms to make system-destabilizing gambles that would be backstopped by taxpayer-funded bailouts. And it's an open question whether new provisions governing CEO pay—which are ultimately voluntary anyway—will put a meaningful dent in execs' exceptionally lavish compensation packages. And of course, if Obama were such an anti-business president, why would profits at many major firms be soaring and the Dow Jones industrial average be 50 percent higher than it was on that dreaded day, Jan. 20, 2009?
What's most insidious about the trope that Obama is hostile to business is how it continues to push the political center of gravity in this country dangerously rightward. Our political system is being increasingly compromised by the corrupting collusion between government and big business, imperiling our capacity to solve urgent problems like climate change, eroding infrastructure and producing dangerous levels of income inequality. Efforts to paint President Obama as an anti-business extremist, when he simply isn't, only help to push the political system closer to a point where it will be helpless to address our most serious weaknesses.