Breaking News

Tweet TWEET

Bashing Capitalism Is No Substitute for an Agenda

Barack Obama’s allies are praising his re-election campaign for the ferocity of its attacks on Mitt Romney and his business record, and for shaping the contest around the theme “the rich against the rest.” The U.S. president’s enemies deplore it for the same reasons.

My feelings are mixed. The strategy isn’t wholly wrong, just woefully incomplete.

Obama is right to attack his opponent, a weak candidate defending an unintelligible policy platform. He’s also right to hammer away at Romney’s elaborate tax-avoidance arrangements: That’s a legitimate target, and Romney is a fool for failing to open his records at the outset. Above all, Obama is right to make fairness an organizing principle of his campaign -- right on substance and right tactically.

He’s wrong, though, to leave it at that. While attacking Romney, he should also be defending his own record. I find his near silence on the Patient Protection and Affordable Care Act inexplicable. Also, not all of his attacks on Romney make sense. The fuss over Bain Capital LLC and outsourcing is unworthy of an intelligent politician. The Obama campaign’s biggest mistake, though, is its fixation on restoring pre-Bush tax rates for the rich.

On all these matters, the president is underestimating the country. Start with taxes.

Tax Policy

Voters understand that inequality has surged in the U.S., and polls show that most Americans agree that the rich should pay more tax. Voters also know that reversing the Bush-era tax cuts for families making more than $250,000 -- a goal that Democrats have raised to a kind of sacred quest -- won’t be close to enough to solve the country’s fiscal problems. Obama should be offering a coherent program for long-term debt reduction, combining phased tax increases (for the middle class as well as the rich) with moderate cuts in public spending.

Would such honesty be suicidal? Only if you think voters are idiots (which, I grant you, appears to be the operating assumption of both campaigns). Voters might be initially startled to be addressed as intelligent adults, but they would come to appreciate the candor, and reward it.

As things stand, Obama’s fiscal intentions are no clearer than Romney’s. In the resulting fog, the difference between the two comes down to this: Obama is avid to raise some people’s taxes, whereas Romney is reluctant to raise anybody’s. I doubt that gives Obama the edge with uncommitted voters, receptive though they might be to the fairness argument with all the fiscal implications spelled out.

The obsession with the Bush-era tax rates is mistaken in another way, too. It opens Democrats to the charge that their notion of fairness is about leveling down not leveling up. That’s still a profoundly un-American idea. You don’t improve the prospects of the unemployed, or of people with limited skills in low-wage jobs, by increasing taxes on the rich. Where is Obama’s agenda for expanding economic opportunity? Shouldn’t he have one? And shouldn’t it have at least equal standing with the quest to hammer the 1 percent?

The U.S. is still a country that reveres rather than resents success. It isn’t a place where everybody making more than $250,000 a year (or $500,000, or $1 million) is seen as greedy or corrupt and deserving of punishment. I’m amazed by how often the Democrats’ rhetoric invites exactly that interpretation. Raising taxes on the rich isn’t a regrettable necessity, according to their worldview, but a basic requirement of social justice, regardless of the use, if any, to which the money will be put. Even if the government didn’t need the revenue, the rich have it coming. This is a political platform with limited appeal in Europe, let alone in the U.S.

Bowles-Simpson

Why isn’t Obama presenting a more comprehensive tax-reform proposal, along the lines suggested in the Bowles-Simpson plan, for instance? An overhaul that broadened the tax base by limiting deductions, increased the rates applied to investment income and taxed inheritance more equitably would raise more revenue, and more fairly, than merely reinstating bits of the pre-Bush code.

Romney’s tax plan, to be sure, is no better. He makes a couple of gestures in the Bowles-Simpson direction, yet they’re dishonest. He proposes to cut marginal rates across the board and to make good the revenue loss entirely by limiting deductions, without saying which deductions will be curbed or how much. That’s not good enough. The most expensive deductions -- for mortgage interest and for employer-provided health care - - are popular and will be difficult to cut back. Curbing or eliminating the health-care deduction puts health-care reform back on the table, another question Romney prefers to avoid. By failing to present a good fiscal plan of his own, however, Obama is letting his opponent get away with this.

The president’s attacks on Romney’s record at Bain are no more likely to impress independent voters. True, Romney dealt with those attacks so incompetently he almost justified them -- defending himself from the charge that he outsourced jobs by calling Obama the “outsourcer in chief.” But Obama’s criticism was ill-conceived in the first place, and most voters know it.

Outsourcing isn’t new, and it isn’t capitalism carried to an unacceptable extreme. It’s part and parcel of the market economy. Companies strive to control costs, which lowers prices and raises real incomes. Buying goods and services from others, at home or abroad, that would cost more to produce for yourself is a good thing. I outsource all building work and car repairs. I’m glad that Apple Inc. outsources the manufacture of its iPads and MacBooks, because it means I can afford them. This isn’t an excess of capitalism. It’s just capitalism.

If Bain made money by finding companies where costs could be squeezed and productivity increased, good for Bain. We need more firms like that.

Obama would be right to say that fairness matters as well. He would be right to say that higher productivity is essential, though we also need to take care of the losers from market competition, widen opportunities for the unlucky and guard against extremes of wealth and poverty. That isn’t what he says. He attacks outsourcing in its own right, which is economic illiteracy of the highest order. And to fold that attack into a main narrative about rich, evil, profiteering businessmen is worse than economically illiterate: In the U.S., at least, it’s a self-defeating strategy.

(Clive Crook is a Bloomberg View columnist. The opinions expressed are his own.)

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles.

Today’s highlights: the editors on the amorality of banks and ineffectual regulators, on the need for a tougher Syria policy and on Republicans’ campaign-finance betrayal; Margaret Carlson on politics as class warfare; Peter Orszag on keeping children from getting fatter and dumber during the summer; Nell Minow on why letting CEOs lead their own boards is like letting students grade their own exams.

To contact the writer of this article: Clive Crook at clive.crook@gmail.com

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.