For a while there, Amity Shlaes was everywhere, from the Daily Show to Marketplace. More recently, her star seems to have faded somewhat with her career settling into comfortable conservative media sinecures with organizations like the National Review. Her arguments seem to be largely the same more than a decade later, though to be honest, I didn't feel motivated to look that closely this time.
Wednesday, February 1, 2012
Obama wants to reward companies that create jobs here in the United States. One of the carrots is a tax credit for companies that move operations back here. Another would double tax breaks for high-tech factories making products here.Putting aside the argument that eliminating "a tax break for moving expenses when a company ships operations overseas" will encourage companies to ship operations overseas (is there a paragraph missing somewhere?), what caught my eye was the way Shlaes tortures this poor metaphor.
These are juicy carrots. But the sticks put forward by Obama are hefty. The president wants to eliminate a tax break for moving expenses when a company ships operations overseas. He also wants to close a tax loophole that allows companies to move some types of profits to overseas tax shelters.
The president figures that businesses will tolerate the pain of the sticks for the reward of the carrots. He thinks if he pokes the stick in one corner, they'll hop over to the corner where the carrots are.
But the trouble with this argument is that the U.S. economy is not a rabbit cage. And business people -- entrepreneurs especially -- don't respond well to prods from a stick. Any stick. If they get a glimpse of the rod, they'll leap away for sure -- but it might just be to somewhere outside the United States. Our cage. And the carrots of cheaper labor there overseas might even be tastier.
Maybe the president is forgetting the goal, which is making the economy grow faster. Enough carrots, and businesses will grow. And they'll create jobs. But pick up even just a few sticks, and you won't get recovery. Instead, we'll all be looking at an empty cage and asking: Where are the rabbits?
It doesn't help that the proverbial carrots and sticks were used to motivate proverbial mules and other large and stubborn beasts of burden. As an old country boy, I can tell you that getting big animals to go where they don't want to go is a challenge. I haven't had that much experience with bunnies, but I have to think it's a bit less daunting. I don't even believe I'd need a stick.
But Shlaes' odd allegorical choice is in keeping with the even odder dichotomy in the way conservative rhetoric has come to treat entrepreneurs and business leaders. Half the time they're bold and decisive figures, the spiritual descendants of our frontier forefathers; the rest of the time they are as delicate as a hothouse flower and as timid as a woodland creature (like, for example, a rabbit).
Shlaes has entrepreneurs leaping away at just "a glimpse" of a rod (and given that she describes closing a couple of tax loopholes as "hefty" penalty, it's fair to say that she really does mean it when she says any stick). Other conservative commentators have speculated that business leaders are slow to invest because they can't deal with the uncertainty caused by a possible return to Clinton era tax rates. We've even heard some argue that the recovery was slowed because the president keeps saying hurtful things about bankers and CEOs.
It's a bit like Dr. Jekyll and Mr. Hyde but with John Galt and Elmo.
Marketplace really needs to get Frum back.