Latest Election news

The McCain running mate guessing game begins. Take a look at some of these names. McCain has started to take some shots at Obama.

James Carville says if Clinton doesn’t win March 4th in Texas and Ohio, it’s over. The Clinton campaign is looking more and more like the Rudy Giuliani campaign. We know what happened there.

Nancy Pelosi is staying neutral though she might be leaning towards Obama. I don’t know if that will help or hurt? The Democratic race is going to come down the “super delegates.” Neither Obama or Clinton will probably win enough delegates to take the nomination.

Record Profits Mean Record Taxes (Go Big Oil)

Record Profits Mean Record Taxes

By INVESTOR’S BUSINESS DAILY |

Taxation: Every time oil companies report strong earnings they seem to tap into a gusher of resentment on the left. One of these days the critics might look at what these businesses are contributing besides vital energy.

When Exxon Mobil recently released its 2007 results, Democratic Rep. Ed Markey complained that the “oil companies are turning the American consumer upside down at the pump, shaking out every last cent.”

A year ago he called the company’s record 2006 profit “outlandish.” Fellow Democrat Rep. Maurice Hinchey of New York called last year’s profit “obscene” and said “the way that Exxon Mobil has crossed the moral threshold is completely unacceptable.”

Then there’s Sen. Hillary Clinton, the presidential wannabe. A year ago, speaking before an audience of Democrats, she said “I want to take” the profits from oil companies.

The demagoguery isn’t limited to populist lawmakers.

The so-called Foundation for Taxpayer and Consumer Rights claims that Exxon’s 2007 profit is “unjustifiable.” Then just a week ago, San Francisco Chronicle columnist Mark Morford called Exxon’s profits “appalling” and the world’s biggest oil companies “the most dominant, ruthless corporations in the world.”

How do people with such worldviews get jobs at respected media outlets? How do they get elected? Do they not know that oil companies not only stoke the prosperity that provides them with their cushy lifestyles, but also make huge “contributions” to their favorite charity — the U.S. government — by paying record taxes?

Consider the magnitude of the contributions from Exxon alone.

On those “outlandish” 2006 profits, the company paid federal income taxes of $27.9 billion, leaving it with $39.5 billion in after-tax income. That $27.9 billion was more than was collected from half of individual taxpayers in 2004.

In that year, 65 million returns — which represent far more than 65 million taxpayers because of joint returns — paid $27.4 billion in federal income taxes. And those taxes were paid on adjusted gross income of $922 billion, according to IRS data, yielding an average tax rate of 2.97%.

This year, according to Mark Perry, the economist who made this striking observation on the Seeking Alpha Web site, Exxon will pay $30 billion in taxes, at a 42% rate, leaving $40.6 billion in profit.

That profit, so loathed by the left, actually plays an important role. No, it’s not used to light the fat cigars Exxon Mobil executives smoke to celebrate the successful squeezing of consumers.

Rather, the money is plowed back into research, development, exploration and drilling to keep the oil flowing, and distributed to stockholders who have risked their capital to build an enterprise that provides an essential good — the lifeblood of our economy.

Far from imposing a hardship on the economy, Exxon Mobil’s profits increase the wealth of those same shareholders, many of whom are everyday Americans feeling the bite of high gasoline prices.

And it’s not just Exxon Mobil that’s paying the freight. From 1977 to 2004, according to Tax Foundation data, U.S. oil companies cleared $630 billion after taxes while paying $518 billion in federal and state corporate taxes at an average rate of 45%.

Over the same period, an additional $1.34 trillion in excise fuel taxes was collected from consumers by the oil companies and turned over to various governments.

Beyond the rabble-rousing rhetoric of politicians, special interests and the shallow-thinking commentariat is an enlightening world of data.

What it tells us in this case is that not only can government not survive without the revenues it extracts from the demonized oil industry, but that the bottom half of taxpayers can hardly live up to their label.

WSJ: That ‘Stimulus’ Nonsense

By ARTHUR LAFFER
February 13, 2008; Page A27

Bipartisanship, a notion that stands as anathema to our basic political premise of checks and balances, has resulted in a stimulus package that will do enormous damage to the U.S. economy.

The idea is simple enough — just have the government write everyone a rebate check, and these rebate recipients will spend most of the money and create enough demand to pull the economy out of its slowdown. With a little luck, the people who supply the rebate recipients with their newly demanded products will also spend part of their added income on yet more products, and so on and so forth until the full effect of the rebate is multiplied manifold and provides a much greater and much needed boost to the U.S. economy.

This logic is totally correct as far as it goes. Unfortunately it doesn’t go far enough.

The proposed rebate of about $600 per man, woman and child is transferred to people based upon some characteristic other than work effort. In fact, if you’ve worked too hard and earned too much, you won’t get a rebate. So in some instances the rebate actually requires the absence of work effort. Now it’s true that some of the people receiving the rebate may also be workers, but working is not the reason each person receives the rebate; it’s simply because he or she is a human being. Thus rebate recipients are given command over real resources for doing something other than working.

In this world of ours, those resources going to the rebate recipients don’t come from the Tooth Fairy. They have to come from workers and producers. If the resources come from workers and producers who thereby receive less for their work than they otherwise would have received, won’t they in turn spend less? Of course they’ll spend less, and the people who now supply them with less will also spend less, and so on down the line.

As my former colleague and friend Milton Friedman liked to say, “There’s no such thing as a free lunch,” and this rebate is exactly what he meant. The net effect is that the reduction in demand from those who pay the real resources will be exactly the same size as the increase in demand from the rebate recipients. It’s sad but true. Income effects always net to zero in a closed system.

To see this point from a more generic standpoint, if the price of apples rises, it is true that apple growers are better off. Their income effects go way up, and they can spend more. But apple consumers are worse off because their incomes go down by the exact same amount, and they have to spend less.

All of the stimulative effects of the rebate to the recipients will be 100% offset by the destimulative effects of the increase in liabilities of the workers and producers who have to pay for the transfer of resources to the rebate recipients. There is no stimulus from a rebate, period.

But even though the income effects net to zero, the substitution effects accumulate, and they accumulate in a most unpleasant way. This should be obvious to even a person untrained in economics. Ask yourself why not a $40,000 rebate per person, indexed for inflation of course, if a $600 rebate is so good. Heck, why don’t we give rebates equal to GDP, so that everyone who doesn’t work and doesn’t produce receives everything, and all those who do work and do produce receive nothing?

GDP would go to zero in a New York minute if workers and producers got nothing for their work effort. And, as fate will have it, any rebate will reduce output because it reduces incentives to produce output. The larger the rebate, the greater the reduction in the incentives to work and the greater the reduction in output. It’s as simple as that. This $170 billion rebate camouflaged as economic stimulus will deal a serious blow to the economic health of the country.

But there’s also collateral damage. Few in Congress understand or care. They think their actions either don’t matter or that they would see a positive impact from their actions if only they did more. If the economy worsens and when their political sensors become alarmed, they’ll up the dose, and goodness knows just how far this vicious cycle will take us. A quick glance back at the 16 years of presidencies of Lyndon Johnson, Richard Nixon, Gerald Ford and Jimmy Carter should give you pause. Whenever you observe bipartisan cooperation, hold on to your wallet and run to the basement.

Mr. Laffer is president of Laffer Associates.

Business Week: Is Obama Good for Business?

Is Obama Good for Business?

In the words of one consultant: “Business would have a seat at the table, but business wouldn’t be able to buy all the chairs”

by Eamon Javers

On Sunday, Feb. 10, after he found out he’d won that day’s Democratic Presidential primary in Maine, but before his appearance on CBS’s 60 Minutes, Senator Barack Obama (D-Ill.) sat down at the keyboard of his computer to write an e-mail. Not to a media consultant or a delegate counter, but to banker Robert Wolf, CEO of UBS Americas (UBS). The two men exchanged notes about the Senate-passed economic stimulus package and that weekend’s G-7 economic summit, Wolf says.

A banker as Obama’s pen pal? Hard to believe, given the senator’s liberal image. But in between rallies and airplane flights on the campaign trail, Obama has also taken time to consult on the economy with billionaire Warren Buffett, whose support of rolling back the Bush tax cuts Obama often cites in his stump speeches. Obama has also been in touch with former Federal Reserve Chairman Paul Volcker, who endorsed the freshman senator in January. “When I sat down with him, I found him to be unbelievably refreshing and smart and thoughtful,” says Wolf, who first met Obama at the offices of financier George Soros. The UBS chief has gone on to raise more than $1 million for the Obama campaign.

The rest of Corporate America may not be persuaded as easily. After all, Obama is hardly a shoo-in for the C-suite set: He’s got a scant three-year record on the national stage, and he wants to roll back the Bush tax cuts that benefit many of the people running big American companies. Plus, the U.S. Chamber of Commerce gives him the lowest rating of any of the three major contenders for the Presidency, behind Senator Hillary Clinton (D-N.Y.) and Senator John McCain (R-Ariz.). But Obama’s sweep of the “Potomac Primary” in Maryland, Virginia, and the District of Columbia makes him a very real contender for the Democratic Presidential nomination.

Economic Agenda

So what would an Obama Presidency look like for business? “It would be a pragmatic, center-left administration,” says Democratic political strategist Steve McMahon, who is unaligned with a Presidential candidate this year. “He’s been pretty clear that business would have a seat at the table, but business wouldn’t be able to buy all the chairs.”

Obama’s record in the Senate is thin, but it does hold some indicators of where he might go as President. Obama has sponsored bills backing a host of traditional Democratic causes, from union labor to alternative fuel to the earned income tax credit. In one move that was unpopular among business executives, Obama sponsored a bill to give shareholders a nonbinding proxy vote on executive pay. Obama voted for a free-trade pact with Peru that contained provisos to protect the Peruvian environment and Peruvian labor. That’s popular stuff with the American left, but hard to take if you’re a U.S. business owner who wants costs to stay low in your new Peru operation. And in a reflection of the Democratic Party’s drift away from pure free-trade positions, Obama says he would look to amend the NAFTA trade agreement to add similar protections to the Clinton-era pact.

After a tour of the Janesville (Wis.) General Motors Assembly Plant on Feb. 13, Obama plans to make a major speech laying out an economic agenda for the rest of the campaign, including details of his plan to restore “balance” to the economy and create millions of new jobs. Wisconsin holds its primary on Feb. 19.

“Less Confrontational” Style

But Obama has also taken several steps that aren’t typical of his fellow liberal senators. He has stocked his Capitol Hill staff with employees whose résumés include McKinsey, the old Andersen Consulting, and other nonpartisan business advisory firms. He joined forces with conservatives on bills designed to improve ethics and transparency in Washington. He voted for a bill in 2005 that made life harder for trial lawyers—a traditional Democratic constituency—by allowing defendants to shift cases more easily to federal court, which can be less favorable to plaintiffs. And he pushed an outside-the-box proposal that would help Detroit automakers pay legacy health-care costs on the condition they reinvest the subsequent savings into hybrids and other fuel-efficient cars. “His whole style of governing is less confrontational,” says Bob Shrum, a long-time Democratic Presidential campaign strategist who’s unaligned in 2008.

During his earlier eight years in the Illinois state senate, Obama also posted a record leavened with both traditional Democratic solutions and more pro-business efforts. He backed long-touted programs like expanding the earned income tax credit for poor families and expanding enterprise zones to boost development in depressed areas. But he pushed for a technology development fund to recruit sophisticated companies to the state and for tax incentives to businesses. “He was as liberal as could be at times, but he still worked with us,” says Jerry Roper, president and CEO of the Chicagoland Chamber of Commerce. “We’d talk on the phone, or I’d go see him. He’s a good guy.”

Careful Streamlining

Some of the names that might fill in the org chart in an Obama Administration are also telling. Obama—whose own father was a Kenyan economist with a PhD from Harvard University—has cultivated a group of economic advisers. They’re generally careful technocrats, and are led by University of Chicago professor Austan Goolsbee. Among the others: Jeffrey Liebman and David Cutler of Harvard and Christina and David Romer of the University of California, Berkeley. Goolsbee has shown a preference for making economic initiatives easier to understand and use, an effort Obama calls “iPod government.”

On the campaign trail, Obama and Goolsbee have crafted proposals to streamline government programs like the Medicare Part D prescription drug benefit, which Goolsbee feels is too complicated. Same with student loan applications and tax forms. Goolsbee says the distinction with Clinton is most evident in the candidates’ plans to increase the personal savings rate. Obama would create an automatic 3% savings withholding from every paycheck that employees could opt out of if they want to. Clinton, on the other hand, proposes a targeted tax break to incentivize savings. The Clinton plan, says Goolsbee, “is what the playbook says to do. But the research says tax credits won’t induce very many people to actually open savings accounts.”

A Good Business Partner?

Still, business has traditionally preferred Republicans in the White House. In its most recent Senate tally, the Chamber of Commerce gave likely GOP nominee McCain an 80% favorable rating, compared with Clinton at 67% and Obama at 55%. Even worse for the two main Democrats, the National Association of Manufacturers rated both a zero, while McCain garnered 100%.

Those grades haven’t hurt Obama’s fund-raising. As a candidate he has eschewed contributions from political action committees and federal lobbyists. Yet he’s been able to rake in cash at a blistering pace of about $1 million per day from individual donors, largely over the Internet. That includes money from employees of old-line industries. According to the Center for Responsive Politics, top contributors to Obama in 2007 included donors from law firms, investment houses, and real estate companies. In total, the center’s analysis shows that Clinton is somewhat more favored by business contributors than is Obama: Eighty-five percent of her donations came from donors affiliated with business, while only 80% of Obama’s did.

Obama is not business’ candidate, but he may yet prove to be business’ partner.

Javers is BusinessWeek’s Capitol Hill correspondent.