Brownsville Tea Party Association

(From the Heritage Foundation)
Posted By Conn Carroll On January 28, 2010

The more things change, the more things stay the same. A little over a year ago, President Barack Obama came to office expecting to pass a “big bang” of policy changes all in the first year: health care, cap-and-trade, and banking regulation. With the big-bang strategy officially a failure , President Obama’s State of the Union address last night desperately tried to keep all of these legislative efforts alive while also acknowledging that the country has firmly rejected his policy agenda.

The result was an incoherent mess of promised tax cuts for small businesses coupled with the threat of tax hikes from his health care and energy proposals; more federal money to encourage banks to lend to businesses, coupled with new taxes on banks and individuals; the continued waste of his $862 billion stimulus plan and $2 trillion in new health care spending, coupled with a delayed and temporary spending freeze. As one of the longest State of the Unions in the past 45 years,  we cannot cover everything here. But our crack team of Heritage experts did hit almost every issue last night, and you can read their full reactions here. Highlights include:

The New Hire Tax Credit
The tax credit for new hires is another recycled idea from Washington. Last tried in the 1970s, the tax credit proved to be a windfall for big businesses that were planning to hire anyway. Small businesses, the engine of job growth, did not use the tax credit largely because they were unaware of it and did not understand how to take advantage of the credit. The jobs tax credit proposal will likely also delay hiring since businesses that understand the tax credit now face an incentive to postpone hiring decisions to take advantage of the tax credit. Extending the Bush tax cuts and undoing the heavy taxes in the health care legislation is a better step to job creation than this tax credit.

The Bank Tax
President Obama tonight called for a new tax on banks and other large financial institutions, “a modest fee,” he said, “to pay back the taxpayers who rescued them in their time of need.” That sounds great, but in truth, the new tax would do nothing of the kind. Mr. Obama knows that almost every major bank has paid-back their bailout funds, with interest. Taxpayers made substantial profits on those repayments. On the other hand, most of the companies that still owe billions to taxpayers, including Fannie Mae and Freddie Mac, and auto firms GM and Chrysler, would not be subject to the tax. In short, Mr. Obama would tax those that have paid back taxpayers and exempt those who have not.

The Spending Freeze
Obama’s spending freeze would apply to a narrow sliver of spending (somewhere around 1/8th of total spending) and at best, savings would be less than one percent of the total budget. Moreover, it explicitly exempts the very entitlement programs driving future deficits. At a time when the deficit is $1.4 trillion and we face a sea of even worse red ink as far as the eye can see, such a freeze is tantamount to bailing out – forgive the double entendre – the Titanic with a dixiecup. And it would start next year, conveniently after the elections. Freezing spending is the right idea, but this freeze falls short of real action.

Energy Production
His calls for new nuclear power, offshore oil and gas exploration, and other new energy technologies are certainly welcome. The problem is that his program of subsidies, special tax treatment, and government support will not work. While government programs can create jobs in specific sectors, the President ignores the evidence that these programs end up killing more jobs than they create. Spain has already gone down this road, and its experience should give the President caution. Between 2000 and 2008, the Spanish government spent $36 billion in taxpayers’ money on wind, solar and mini-hydro development. Each green job created cost on average $758,471.

Foreign Policy
Many around the world have expressed concern that a U.S. administration so focused on domestic priorities and troubles as the current one will be too inward-looking to be deeply engaged in the world. Judging by its placement in his list of priorities, foreign affairs did seem like an afterthought, briefly addressed. In Afghanistan, allied nations are hardly coming together to support the President’s surge — indeed French President Nicolas Sarkozy very publicly stated this week that he would not be contributing any more troops to the endeavor, this on the eve of the Afghanistan conference in London.

And the fight on terrorism has not, as stated, been advanced by the Obama administration — quite the reverse as the nation has become more vulnerable. Nor has the administration distinguished itself by its support for human rights in Iran — in fact it missed a critical moment to get involved during last summer’s uprisings against the Iranian regime. As for the President’s aspiration to control nuclear materials around the world, a goal to be reached through an international conference — that horse left the barn a long time ago.

In “Government’s End,” Jonathan Rauch writes: “Economic thinkers have recognized for generations that every person has two ways to become wealthier. One is to produce more, the other is to capture more of what others produce. … Washington looks increasingly like a public-works jobs program for lawyers and lobbyists, a profit center for professionals who are in business for themselves.” From complicated new tax credits that small business owners don’t have the time or expertise to take advantage of, to new energy, financial and trade regulations that only large corporations have the lawyers and lobbyists to take advantage of, every policy proposal in Obama’s speech last night is a boon for the lawyer/lobbyist economy in Washington and a hindrance to wealth-creating Americans everywhere. This was a speech only the entrenched interests in Washington could love.