"No taxes can be devised which are not more or less inconvenient and unpleasant." --George Washington
2013-08-02-digest-1

While on his "Look What I Did to the Economy" tour in our hometown of Chattanooga Tuesday, Barack Obama offered up a new "grand bargain." In exchange for raising corporate taxes, he promises to spend more money on Big Government priorities. As The Wall Street Journal quipped, "President Obama made himself an offer he couldn't refuse."

The president's offer includes lowering the world's highest corporate tax rate of 35 percent to a more competitive 28 percent (25 percent for manufacturers), but only in exchange for closing loopholes and eliminating deductions in order to raise more revenue. Furthermore, Obama wants to saddle companies with a new minimum tax on foreign earnings. Then he wants to spend the windfall on more failed "stimulus" projects. Usually, tax reform simplifies the code while remaining revenue neutral, but not for Obama and his NeoCom cadres.

One of the biggest problems with this proposal is that most small business owners file taxes as individuals, and -- thanks to Obama's tax hike earlier this year -- the highest individual rate that many of them pay is nearly 40 percent. Many small businesses operate with far tighter margins than their large competitors, and sticking it to them with a 16 percentage point tax penalty puts them at an even greater disadvantage. We support lowering the corporate rate, but it must be done equitably and to encourage economic growth.

If creating jobs is Obama's focus, he needs glasses. As usual, headline numbers look good -- unemployment dropped to 7.4 percent in July from 7.6 percent in June. But the underlying data is not at all good. The number is only ticking downward due to attrition, not job creation. Though the economy added 162,000 jobs, a third of them were in retail (read: part-time), while constructionlost 6,000 jobs. Numbers for May and June were revised downward, hours and earnings declined (while Obama's tax hikes take a bite out of paychecks), and the number of people who gave up looking for work increased. If labor participation remained what it was in 2009, unemployment would be 10.7 percent.

Also, given Obama's high-tax, high-spend proposal, one is left to conclude that this tepid job growth, as well as the second quarter's GDP growth of 1.7 percent, is too fast for Obama. Reported first quarter growth was revised from 1.8 percent down to 1.1 percent. The fourth quarter in 2012 -- as businesses stopped everything waiting for the Obama tax increase to hit -- grew at a barely detectable 0.1 percent. Normal growth is well over 3 percent.

Which brings us to an interesting aspect of the latest Commerce Department GDP report. Every few years, the Bureau of Economic Analysis revises the National Income and Product Accounts in order to better account for changing elements of economic growth. After the first such revision since July 2009 -- one that, based on new assumptions, remeasures the U.S. economy back to 1929 -- the Obama administration says that "the recovery from the Great Recession has been slightly faster than previously reported." The new estimate shows cumulative growth of 8.5 percent from 2009 to 2013, up from the previous estimate of 8.1 percent.

The White House also claims growth would have been faster if it weren't for that blasted sequester. You know, the one that was Obama's idea.

Despite the spin seemingly in Obama's favor, this new assessment isn't entirely a bad thing. It better measures intellectual capital in a modern information age, resulting in a U.S. economy $551 billion bigger than previously thought. Furthermore, the Great Recession itself wasn't as bad as previously thought, and growth in the years of Ronald Reagan and George W. Bush turns out to have been even better.

Even the good news for Obama is mostly spin, though. The truth is his "recovery" is even more dismal by comparison to others -- especially the Reagan recovery, in which growth from the 1981-82 recession averaged 5 percent for four years compared to just 2.2 percent since 2009.

It's galling that Obama talks about the stagnant national economy as if he just landed from Mars, when, in fact, the economy is mired in the mud because of five years of his failed policies. His deficit-spending binge, which nearly doubled the national debt, brought us nothing but slow growth and persistently high unemployment. His solution is to "play it again, Sam," and to see if he can't finish running the economy into the ground.

Chattanooga Free Press Editor Fired