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Obama’s misuse of the tax system

“I will stop giving tax breaks to corporations that ship jobs overseas, and I will start giving them to companies that create good jobs right here in America.” — Sen.

“I will stop giving tax breaks to corporations that ship jobs overseas, and I will start giving them to companies that create good jobs right here in America.” — Sen. Barack Obama accepting the Democratic Party nomination for president of the United States.

Of all the lines in all the speeches delivered during the Democratic National Convention, none is more indicative of what an Obama presidency portends than his loudly applauded promise to use the tax system to reward corporations that help pursue his agenda (and conversely punish those that do not). Jobs are good, but Obama’s proposed use of the tax system as a means to the end of new jobs ignores damaging trade-offs with economic realities, not to mention fundamental constitutional concepts like separation of powers and government restraint.

In a post earlier this week I made a case that Obama and John McCain each have conceptions of the presidency so expansive as to be unrecognizable to the authors of Article II of the U.S. Constitution. In his go-forth-and-multiply closing address, Obama was true to form. He promised a government obligation to provide every child a world class education. He created a right to affordable accessible health care for every single American. He assumed employee sick days and family leave as a matter of presidential concern. He somewhere found presidential authority to assure equal pay for equal work.

Political agenda
But among all his proposals none so clearly illuminate the essence and heritage of Obama’s brand of liberalism than his direct endorsement of using the tax system to further a political agenda.

It is more than a constitutional inconvenience that Congress, not the president, in Article I, Section 8 of the U.S. Constitution is given the “power to lay and collect taxes, duties, imposts and excises.” The operative word is “power.” The constitutional power to lay and collect taxes is not to be read as the proverbial “rubber stamp” of presidential initiative. On tax policy it is the president through use of the veto power that checks Congress; Congress, representing the people of the several states, has the obligation to initiate tax policy.

In addition, the constitutional purpose of taxes is “to pay the debts and provide for the common defense and general welfare of the United States.” Despite Justice Holmes declaration that “taxes are the price we pay for civilization,” the power tax is nowhere in the constitution equated with the power to reward or punish. 

But even if we brush aside the constitutional questions of Obama’s notion of taxes as carrots and sticks (but, then, why would we?), the boldness of his intention to use the tax system to reward good corporate citizens and punish profit-seeking corporations is troubling, to say the least. That the tactic is not new is one thing — to extol it openly without embarrassment is indeed a change.

Iowa Gov. Tom Vilsack, who made a brief run at the Democratic presidential nomination, has said (quoted in “All Together Now. Common Sense for a Fair Economy”): “Government is nothing more or less than the instrument whereby our people come together to undertake collectively the responsibilities we cannot discharge alone.”  To the contrary, however, government, with the power to reward and punish unrestrained by the Constitution, is a lot more menacing than the church men’s club, the PTA, even the Teamsters or other voluntary associations.

“Liberals are correct when they bemoan the collusion of government and corporations,” writes the National Reviews’ Jonah Goldberg. “They even have a point when they decry special deals for Haliburton or Archer Daniel Midland as proof of creeping fascism. What they misunderstand completely is that this is the system they set up. This is a system they want. This is the system they mobilize and march for.”

Would the gathered Democrats have cheered as loudly had Vice President Dick Cheney openly laid claim to administration authority to impose taxes for political purposes?

‘Fascist bargain’
The Obama agenda may indeed differ from that of President Bush, but the nature of what Goldberg refers to as the “fascist bargain” is the same. It goes a little bit like this: “You, Mr. Industrialist, may stay in business and own your factories. In the spirit of cooperation and unity, we will even guarantee you profits and a lack of serious competition (or special tax breaks). In return, we expect you to agree with — and help implement — our political agenda.”

Obama’s misuse of the tax system takes a page from the play book of John McCain’s presidential role model,  Teddy Roosevelt. Recognizing that his trust-busting efforts had “substantially failed,” he adopted the progressive if-you-can’t-beat’em-join’em strategy toward big corporations.

“The way out lies, not in attempting to prevent such combinations, but in completely controlling them in the interest of the public welfare,” Goldberg quotes Roosevelt.

“The New Nationalism,” Roosevelt’s call for change, “rightly maintains that every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it” — require it to bring about the “world as it should be,” the theme of Michele Obama’s convention speech.

The take away from the Democratic Convention is that while the Democrats drew clear distinctions between their vision of the world as it should be and the world of the Bush administration and by extension John McCain, they are equally inclined to take a cavalier attitude toward the Constitution when it suits their ends. In other words, they walk a morally fine line — their ends justify Bush’s means.

Ironically, the Democrats for all their rhetoric, left the door open for McCain Republicans, on the level of principle, to move further from the constitutionally cavalier and expansive Bush presidency than the Democrats managed to do. It remains to be seen if Republicans will seize the day.