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Obama's Big-Government Vision

A Commentary by Lawrence Kudlow

Thursday, February 28, 2008

Sen. Barack Obama is very gloomy about America, and he's aligning himself with the liberal wing of the Democratic Party in hopes of coming to the nation's rescue. His proposal? Big-government planning, spending and taxing -- exactly what the nation and the stock market don't want to hear.

Obama unveiled much of his economic strategy in Wisconsin this week: He wants to spend $150 billion on a green-energy plan. He wants to establish an infrastructure investment bank to the tune of $60 billion. He wants to expand health insurance by roughly $65 billion. He wants to "reopen" trade deals, which is another way of saying he wants to raise the barriers to free trade.

He intends to regulate the profits for drug companies, health insurers and energy firms. He wants to establish a mortgage-interest tax credit. He wants to double the number of workers receiving the earned-income tax credit and triple the benefit for minimum-wage workers.

The Obama spend-o-meter is now up around $800 billion. And tax hikes on the rich won't pay for it. It's the middle class that will ultimately shoulder this fiscal burden in terms of higher taxes and lower growth.

This isn't free enterprise. It's old-fashioned-liberal tax, and spend, and regulate. It's plain ol' big government. The only people who will benefit are the central planners in Washington.

Obama would like voters to believe that he's the second coming of JFK. But with his unbelievable spending and new-government-agency proposals, he's looking more and more like Jimmy Carter. His is a "Grow the Government Bureaucracy Plan," and it's totally at odds with investment and business.

Obama says he wants U.S. corporations to stop "shipping jobs overseas" and bring their cash back home. But if he really wanted U.S. companies to keep more of their profits in the states, he'd be calling for a reduction in the corporate tax rate. Why isn't he demanding an end to the double-taxation of corporate earnings? It's simple: He wants higher taxes, too.

The Wall Street Journal's Steve Moore has done the math on Obama's tax plan. He says it will add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax and a 55 percent estate tax.

Not only is Obama the big-spending candidate, he's also the very-high-tax candidate. And what he wants to tax is capital.

Doesn't Obama understand the vital role of capital formation in creating businesses and jobs? Doesn't he understand that without capital, businesses can't expand their operations and hire more workers?

Dan Henninger, writing in last Thursday's Wall Street Journal, notes that Obama's is a profoundly pessimistic message. "Strip away the new coat of paint from the Obama message, and what you find is not only familiar," writes Henninger. "It's a downer."

Obama wants you to believe that America is in trouble, and that it can only be cured with a big lurch to the left. Take from the rich and give to the non-rich. Redistribute income and wealth. It's an age-old recipe for economic disaster. It completely ignores incentives for entrepreneurs, small family-owned businesses and investors.

You can't have capitalism without capital. But Obama would penalize capital, be it capital from corporations or investors. This will only harm, and not advance, opportunities for middle-class workers.

Obama believes he can use government, and not free markets, to drive the economy. But on taxes, trade and regulation, Obama's program is anti -growth. A President Obama would steer us in the social-market direction of Western Europe, which has produced only stagnant economies down through the years.

It would be quite an irony. While newly emerging nations in Eastern Europe and Asia are lowering the tax penalties on capital -- and reaping the economic rewards -- Obama would raise them. Low-rate flat-tax plans are proliferating around the world. Yet Obama completely ignores this. American competitiveness would suffer enormously under Obama, as would job opportunities, productivity and real wages.

Imitate the failures of Germany, Norway and Sweden? That's no way to run economic policy.

I have so far been soft on Obama this election season. In many respects, he is a breath of fresh air. He's an attractive candidate with an appealing approach to politics. Obama is likeable , and sometimes he gets it -- such as when he opposed Hillary Clinton's five-year rate freeze on mortgages.

But his message is pessimism, not hope. And behind the charm and charisma is a big-government bureaucrat who would take us down the wrong economic road.

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