The Audacity of Ignorance

Promoted. -Patrick

I don't want to call Washington Post columnist Sebastian Mallaby a liar, so after reading his op-ed today comparing Barack Obama and John McCain on economic growth I'll just assume he is ignorant. Mallaby correctly identifies four policy areas that directly affect the economy, but on each issue he is dead wrong about who has the better policies.

First Mallaby tackles taxes writing: "Lowering taxes was terrifically pro-growth in Ronald Reagan's time, when the top income tax rate was slashed from 70 percent in 1980 to 50 percent in 1982, significantly changing incentives for work and risk-taking. But with the top rate at 35 percent today, a modest shift in either direction makes less difference."

But personal income taxes are the least likely to affect economic growth. Corporate taxes and capital gains taxes have a much stronger impact on the economy. Over the last decade the rest of the world has figured out that one great way to spur growth is to lower the corporate tax rate. So while the US used to have comparatively lower rates, now the US has the highest corporate tax rate in the world. And on capital gains, Barack Obama wants to almost double the rate from 15% to 28%. That will only drive investment and job creation out of the country.

Next Mallaby tackles regulation writing: "Getting the nanny government out of trucking and airlines yielded huge benefits in the 1970s and 1980s. ... We are left with government rules to protect the environment, check the safety of medicines and prevent systemic financial crises. These rules are generally helpful. There's nothing "pro-growth" about bashing them."

Mallaby doesn't mention that the regulatory burden on the US economy has grown over $28 billion during the Bush Administration. And even that total does not include the billions of dollars in financial transactions Sarbanes-Oxley has sent overseas.

Mallaby then moves to trade where he writes: "Today most trade barriers have been removed; although the remainder certainly ought to be abolished, there's not much prospect of that because the Doha trade talks have stalled. Provided that Obama finds a way of crawling back from his embarrassing talk of reopening NAFTA, the gap between his trade views and McCain's doesn't much matter."

Wow, talk about audacity. Mallaby admits Obama is 100% wrong on trade and then says it doesn't really matter since, if Obama completely reversed his position, he would be no different than McCain on the issue. Talk about the Audacity of Hope. In 2005, over one fifth of all US economic growth came from trade. No matter how much Mallaby wishes it otherwise, Obama has promised that one of his first priorities will be to undo US leadership on free trade.

Finally Mallaby turns to education where he praises Obama's calls for early-childhood education. But primary and secondary education do not drive economic growth. Higher education does. And as Fareed Zakaria exhaustively shows, "higher education is the United States' best industry. In no other field is the United States' advantage so overwhelming." On early education Zakaria writes: "In other words, the problem with U.S. education is a problem of inequality." And more money is not the answer for equality in education. If it was Washington DC would have the best school system in the country; it doesn't. Primary and secondary education in this country will only get better when they are freed from the death grip of the teacher's unions. And unless Obama suddenly advocates repealling the Wagner Act, early education reform will continue to happen at the state level.

Mallaby is free to endorse Obama for whatever reason he wants (I hear Obama makes really pretty speeches). But if he wants to continue to have any credit as an economics contributor, he should not make the case Obama would be better for economic growth.