After much anticipation, Democratic Presidential Candidate Barack Obama revealed parts of his economic plan in an interview with The Wall Street Journal. As reported in their June 17, 2008 article “Obama Plans Spending Boost, Possible Cut in Business Tax,” Bob Davis and Amy Chozick highlight some of the major proposals in Senator Obama’s plan.
Senator Obama’s plan focuses on three proposals: significant government spending on energy projects (infrastructure projects are included in the Senator’s plan), tax code reform to “narrow the gap between winners and losers in the U.S. economy,” and a reduction in business taxes.
The first leg of the plan, energy projects, is intended to spur the economy by providing work for the many unemployed. Included in these projects would be highway construction, along with power plant and other energy-related construction. Senator Obama proposes spending $15 billion over 10 years on these projects, paid for with revenue from a carbon trading system. The proposed trading system is projected to generate revenue of roughly $100 billion by providing a platform for trading pollution permits. The Senator also plans an infrastructure reinvestment bank which would spend $60 billion on high-speed rail service and improved energy transmission, among other projects. To further encourage development in the energy sector, Senator Obama wants to provide funding to “middle stage” companies invested in new energy technologies. In his view, these companies, which find themselves at a stage between innovation and commercialization, often struggle to raise the capital necessary to move their products to commercial viability at the same time that their products could provide the next step in the energy puzzle. (This program is similar to one under the Clinton administration which faced strong headwinds from Republicans and never expanded beyond small-scale projects.) Senator Obama also intends to establish a “green technology” fund to promote environmentally-friendly development.
For his part, Republican Presidential Candidate John McCain agrees with Senator Obama on the need for a cap and trade system, though his would be much smaller in terms of projected revenue. As for green technology and middle-stage funding, Senator McCain feels that Silicon Valley and venture capital have things covered. But I digress…
Senator Obama proposes a wide variety of changes to the tax code, focused on equalizing the tax burden faced by individuals and corporations. For starters, he would like to eliminate President Bush’s tax cuts for those families making more than $250,000 while maintaining them for those making less than that threshold. He would also eliminate the capital gains taxes for start-up companies, so that these entities can “accumulate capital [and] reinvest profits…to the point that they stabilize.” (Unfortunately, Senator Obama hasn’t defined a startup company.) For individuals entering the public service sector after college, the Senator proposes $4,000 annual tuition credits on the individual’s income tax return. His final proposal would eliminate income taxes for those individuals over the age of 65 who make less than $50,000 annually. The Senator anticipates that these changes will help “level the playing field” and allow him to reduce corporate tax rates as well as maintain the capital gains rate reductions President Bush implemented. In the article, Mr. Obama asserts “How much you pay in taxes as a corporation a lot of times depends on how good your lobbyist is.” His proposed changes aim to eliminate the lobbyist effect from calculating tax rates.
Early in the article, Mr. Obama states “Globalization and technology and automation all weaken the position of workers.” Many of his proposals aim to encourage technology development for the assistance and empowerment of workers, demonstrating his attempt to use technology to strengthen employees rather than weaken them.
One small item of note that could be lost in the sprawling article: Senator Obama’s plan to subsidize high-speed internet access as part of his infrastructure reinvestment bank proposal.
So what does all of this mean? We’re finally seen a bit of what Senator Obama’s economic policy may be. He has some interesting ideas, some new and some recycled. I think one of the biggest things his proposal shows is that he is focused on helping the average American in a time of increasing economic pressure and uncertainty. He has woven his “change” mantra into the proposal with some new, somewhat radical spending plans, while showing his critics that he can also learn from his predecessors by rehashing some long-debated concepts and ambitions. I am very interested to see the further details that will invetitable emerge in the coming months regarding Senator Obama’s economic policies.