This Wall Street Journal editorial looks at Obama’s “jobs plan” of a $5,000 tax credit for small businesses that hire workers. Jimmy Carter did the same thing as unemployment rose during his regime and the results were predictably dismal. Even leftist groups like the Tax Policy Center think that hiring subsidies are bad policy, doling out money mainly to firms that would have hired anyway.
Comparing Obama’s silly notions with the Kennedy and Reagan policies of across-the-board tax cuts, the editorial states, “That’s the opposite of Mr. Obama’s strategy, which is to dole out special tax credits and loopholes for favored behavior or industries — hybrid cars, buying a new house, wind power — and then paying for these by raising tax rates on anyone making more than $200,000 starting next year. The result will be higher tax rates paid on a shrinking base, with a misallocation of capital toward projects chosen by politics rather than by prices or potential return on investment.”
That point is vital. The more heavily politicized a nation becomes, the more its resources to directed by political fiat (that is by officials who don’t have their own money at risk) and the less they’re directed by profit and loss conscious individuals who will gain if they’re right but lose if they’re wrong.
