Thursday, January 29, 2015

It's Not All Revenue and Jobs

Whether business or government, the long view is given short shrift

This week's political dust up over President Obama's proposal to tax college savings 529 plans highlights that the President seems simultaneously brash and clumsy. Columnist Charles Lane has a pretty good take on this episode pointing out that while 529 plans are yet another subsidy and entitlement, the President ran up against powerful political foils and entrenched interests.

For me the President erred on three accounts. First he chose to go after a tax expenditure that even though it subsidizes primarily the well to do and drives up the cost of tuition, the benefits accrue to an area that is ostensibly a public good: education. Second he chose to talk immediately about how the revenue raised would immediately go to new spending programs rather than debt reduction. (Ruth Marcus has a good piece on this forgotten concern.) Finally he chose to piecemeal and nip at our grotesque tax code rather than mount a full-out frontal assault.

If only he had invoked the magic word: jobs.

The President and most politicians don't give voters enough credit. With a little bit of information and a decent intellectual argument, we can understand the policy and consequences laid before us. We may not like it and it may hit us in the wallet, but not every tough choice comes with a cookie or employment.

Companies also play the jobs and money cards to promote their agenda. The Keystone XL pipeline is plumped for the jobs it creates rather than as a fairly benign way to transport oil that's going to get to market one way or another. In Virginia the Coalfield Employment Enhancement Tax Credit is promoted as a way to save jobs – jobs that are going away as other energy sectors provide cheaper, cleaner fuel. Homeownership and the American Dream are lauded for job creation by builders, real estate agents, and mortgage lenders even as tax benefits are reaped primarily by the rich and homes trap household wealth in a single immobile, illiquid asset.

Domestic producers and trade unions offer a protectionist agenda in the name of American jobs that, at the same time, can drive up consumer prices. Farmers tout "food security" at the cost of higher prices and $20 billion in subsidies each year. Pharmaceutical firms promote high-cost concoctions that promise health and an "enhanced" lifestyle to consumers that would do better with eating less and exercising more.

I probably got a little off track with this post. However I think it's good to remind ourselves every now and then that most agendas – political and entrepreneurial – are not altruistic with our best interests in mind. Politicians are selling themselves; businesses are selling their wares.

This may seem a bit cynical. But as voters and consumers we need to approach policy and products with a cynic's eye and open mind. And we must demand long-term honesty without short-term kibble.