By Murray Weidenbaum, Foundation for Economic Education
The government of the United States is in the midst of debating major new undertakings, ranging from health care to climate change to energy development to tax reform. Â Yet far more fundamental is a basic but stealth shift in national prioritiesâ€”in the form of a rapid and pervasive expansion of government power over the private sector of the economy.
Although no serious discussion is occurring in the nation about the desirability of shifting economic power from individual decision-makers to the national government, that shift is a basic characteristic of virtually every policy proposal being debated in the Congress.
Take tax policy. Â A 131-page document (pdf) issued by the Treasury goes way beyond recommending the extension of some of the expiring Bush administration tax cuts. Â For example, the fine print contains over a dozen ways of discouraging American firms from doing business and investing overseas. Â Supposedly minor technical changes also would have a severe impact.
For example, eliminating LIFO (last in-first out) inventory accounting will raise business taxes over $60 billion in one decade. Â The Treasury also wants to revive four corporate environmental taxes that were eliminated in 1969. Â These four arbitrary taxes have no relation between the tax burden imposed on a company and the pollution that it generates. Â This bears an uneasy resemblance to Willie Sutton, who robbed banks because that was where the money was. Inevitably a variety of technical tax provisions will increase the paperwork burden on business. Â The penalties for failing to file information returns (such as Form 1099) promptly and accurately are raised in a very complicated fashion involving three tiers of penalties.
On the expenditure side, the typical stimulus project increases the power of government in private business decision-making. Â The bailout of the automobile industry is really an inefficient method of financing union pension and health plans. Â The stockholders are zapped and the bondholders poorly treated. Â The taxpayers are left holding the bag, especially considering the restrictions on General Motors importing the really fuel-efficient cars they produce overseas. Â Apparently, the new General Motors factory for building compact cars was chosen on the basis of â€œcarbon footprintâ€ and â€œcommunity impact.â€
It is hard to keep a straight face when analyzing the new â€œcash for clunkersâ€ program. Â For example, owners of the biggest old clunkers get a $3,500 credit for trading in the old vehicles for a new one with an improvement of just one mile per gallon. Â Surely, it would save energy if the Treasury just mailed the $3,500 checks directly to Detroit!
Of course, the Obama administration is making some reductions in federal spending. Â It is reportedly imposing a 9 percent reduction in the budget for the division in the Labor Department that polices fraud and other illegalities on the part of labor unions. Â As noted below, a simultaneous expansion of business-oriented antitrust enforcement is taking place.
Turning to regulation, one of Ralph Naderâ€™s biggest disappointments during his heyday as a consumer advocate was the failure of his proposal for a new Consumer Protection Agency. Â However, the administrationâ€™s financial regulatory plan creates a powerful new Consumer Financial Protection Agency (CFPA).
This new free-wheeling agency takes authority now divided between the Securities and Exchange Commission (SEC) and the Federal Reserve System. Â In a change guaranteed to cause confusion, the CFPA will share authority with the Federal Trade Commission. Â The new regulatory agency will also have a mandate to give consumers more economic education. Â Educators find that especially scary.
Moreover, the agency will have its own money pot, independent of the normal congressional appropriations process. Â It will be financed directly by fees assessed on â€œentities and transactionsâ€ across the financial sector.
The Treasuryâ€™s financial plan contains many other expansions of government power over business. Â The Federal Reserve System is given new authority to oversee any large financial entity whose failure the Fed thinks could generate â€œsystemic risk.â€ Â The Treasury heads a new Financial Services Oversight Council to â€œresolveâ€ the inevitable jurisdictional disputes among federal agencies. Â A new Office of National Insurance is to be established in the Treasury to monitor â€œall aspects of the insurance indus