Fiscal Roulette

Barack Obama could not have chosen a better location than Las Vegas for his speech last Friday about the economy, because the wager he admitted to be making with taxpayer money has little guarantee of paying anything in return.

“We’re going to be going from only having two percent of the global capacity to make advanced batteries that go in trucks and cars run on electricity to forty percent just in the next five years,” Obama said, explaining his economic wager, and with an implicit suggestion that burning coal has nothing to do with producing batteries nor electricity, he added, “That’s what we’re working to do with the clean energy manufacturing tax credits that we enacted last year.”  He then continued by trying to bedazzle the audience with technical jargon.  “Some people know these tax credits by the name ‘48c,’ which refers to their section in the tax code [1].”  But what Obama failed to mention with his technical jargon is the more relevant fact that the Congressional Budget and Impoundment Control Act of 1974 requiring him to report such spending defines it by the name that people serious about improving the economy use – tax expenditures.  In other words, Obama’s tax subsidies for the businesses of his choice are revenue losses considered to be worse than outright spending programs due to the uncertainty they create for fiscal accountability, in addition to the compliance costs they raise [2].  Evidence of related uncertainty was reported in The Wall Street Journal yesterday in an article about the administration’s tax expenditures for companies hiring unemployed workers that critics believe would be more transparent as a broader tax cut [3].

The late professor and management expert Peter Drucker would have probably been one of the first to say that if Obama’s clean energy bets were so good, they wouldn’t need the added benefit of tax expenditures that only add to a national debt described on Sunday by the administration’s debt and deficit commission as gloomy [4].

A clean energy idea to create jobs by transforming the national infrastructure and making much more common sense for government assistance to the private sector came from George W. Bush’s leadership for the global adoption of a hydrogen economy.  It is an idea deserving of further research and development [5].

References

[1] http://www.whitehouse.gov/the-press-office/remarks-president-economy-university-nevada-las-vegas

[2] Bruce F. Davie, “Addressing Tax Expenditures in the Budgetary Process,” in Handbook of Government Budgeting, ed. Roy T. Meyers (San Francisco: Jossey-Bass, 1999), 277-278.  Graham Bannock, Ron Baxter, and Evan Davis, eds., The Economist Dictionary of Economics, Fourth Edition (Princeton: Bloomberg Press, 2003), 377.

[3] Deborah Solomon, “Obama Pushes Tax Credit,” The Wall Street Journal, July 12, 2010, U.S. News, A4.

[4] Peter F. Drucker and Joseph A. Maciariello, Management (New York: HarperCollins, 2008), 357-404.  “Debt Commission’s Leaders Pessimistic.” The Courier-Journal, July 12, 2010, Nation & World, A3.

[5] Matthew L. Wald, “Will Hydrogen Clear the Air? Maybe Not, Say Some,” The New York Times, November 12, 2003, Business section.  Peter Hoffman, Tomorrow’s Energy: Hydrogen, Fuel Cells, and the Prospects for a Cleaner Planet (Cambridge: MIT Press, 2002), 1.

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