Monday, February 21, 2011

Obama in Cleveland to talk small business

President Barack Obama is scheduled to visit Cleveland State University today along with members of his cabinet to hold a Winning the Future Forum to hear from small business owners and leaders on how to develop the economy.

"The president will continue his focus on jobs and he will be focusing on how we can work together with small and large businesses to grow the economy and put people back to work," said White House deputy communications director Jennifer Psaki in a conference call Friday.

The forum, in association with northeast Ohio economic development organizations JumpStart America and NorTech, will begin and conclude with remarks from the president. The majority of the forum will be broken down into sessions on workforce development, clean energy, exports, entrepreneurship and access to capital and tax breaks for small business.

The forum is pivotal because two-thirds of the net job growth in the U.S. comes from small business and half of employed Americans own or work for a small business, said Karen Mills, administrator of Small Business Administration.

"There's nothing I like better than to go out and listen to small businesses," Mills said.

Faculty at Ohio State also like the idea of government listening to ideas and concerns from small business leaders.

"Anytime you can get feedback from small business to help our government and society it's going to help," said Lucia Dunn, an OSU economics professor.

Senior lecturer in the Fisher College of Business, Marc Ankerman, has the opportunity to participate in such an event since he is a small business owner himself. He owns Ankerman Training Solutions, a training and development consultant for large and small companies.

"I would love to do that. Anytime a small business owner gets an opportunity to talk about how taxes are influenced and how we can stimulate jobs is great," Ankerman said. "Letting any of us voice our opinions make America what it is."

Mills said some of the tools the government has given small business owners in the past few years have been important tools.

"The ability of these entrepreneurs and other small businesses to get the tools they need — the access of capital, the entrepreneurial mentoring and the reduction in regulatory barriers and issues, so that they can grow and do what they do best," Mills said.

The past couple of years have seen 17 tax cuts for small businesses and $41 billion in the hands of small businesses through the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010, Mills said.

"There's nothing small business owners like better or can do more with than cash in their pocket from tax cuts," Mills said.

The Small Business Jobs Bill was the "most important piece of small business legislation in over 10 years," Mills said.

Dunn explained the importance of small business on America's economy.

"Every town has small businesses. They may only employ two or three people, but they're so spread out. If they can get help, it will help everyone," Dunn said. "No area is going to be left out because they're distributed as the population is distributed."

Ankerman said there are a few advantages small businesses have over large ones in the workforce they are able to hire.

"They can hire different people for flexibility of hours, which allows them to do what some large businesses can't," Ankerman said. "There's an opportunity for small businesses to hire a diverse group of people which allows for more community."

In Obama's State of the Union address on Jan. 25, he spoke of the need to compete globally by out-innovating, out-educating and out-building. Mills considers this forum to be a good opportunity to do so.

"It is our entrepreneurs who really are at the heart of America's ability to compete and create jobs," Mills said.

Sunday, February 13, 2011

Laffer Curve Pays Billions If Obama Just Asks: Kevin Hassett

The U.S. is about to have the highest corporate tax rate in the developed world because our competitors have noticed that revenue goes up as rates go down. Multinational corporations today nimbly move their profits to the friendliest environment, rewarding tax havens like never before.

It looks as if President Barack Obama and congressional Democrats are going to miss out on the single biggest policy opportunity for the U.S. this year because of their ideological resistance to the idea that lower rates can increase revenue, also known as the Laffer curve.

The devil, as so often happens, was in the details of what Obama said in his State of the Union address: “I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years -- without adding to our deficit.”

A careful reading shows that Obama conditioned his support for tax reform on revenue neutrality -- that is, no net loss or gain in what the federal government collects in taxes. The usual referee in such matters, Congress’s Joint Committee on Taxation, doesn’t fully incorporate what’s known as dynamic scoring, or anticipating higher growth from lower taxes. So legislation that meets Obama’s prerequisite probably won’t lower corporate taxes significantly.

Message Received

If there were any doubts about the administration’s position, they were put to rest last week by Treasury Secretary Timothy Geithner, who said, “We’re not going to ask Americans to pay higher taxes so we can lower taxes on businesses.”

Obama and Geithner must not understand the fix our country is in.

Corporate taxes “are the most harmful type of tax for economic growth,” according to a November 2010 report by the Organization for Economic Cooperation and Development.

In the World Bank-supported “Doing Business 2011” report, the U.S.’s worst ranking by far was in the category called “paying taxes” -- 62nd out of 183 economies, tied with Uganda. That needs to be fixed, whether or not the budget experts on Capitol Hill say the repair costs too much.

The U.S. top corporate tax rate of 35 percent in 2010 was higher than all other OECD nations except Japan, which has embarked on a 5 percentage-point cut. The average rate in the OECD is 23.5 percent. Ireland’s rate is only 10.9 percent; Turkey’s is 13.1 percent.

If the high rate in the U.S. raised lots of revenue, cutting it might be bad news for the federal budget. But that’s not a problem.

Below Average

The U.S. earns less federal corporate tax revenue, as a percentage of gross domestic product, than the average OECD country. Higher rates, lower revenue.

From 2000 through 2009, the U.S. average corporate tax revenue as a percentage of GDP was 2.06 percent, according to OECD data. The average for the rest of the OECD was almost a percentage point higher, at 3 percent.

In 2009, the U.S. ratio dropped to 1.64 percent. That year, the U.K., with a tax rate of 28 percent, raised 2.8 percent of GDP. South Korea raised 3.4 percent of GDP with a rate of 22 percent. Belgium raised 2.5 percent of GDP with a rate of 34 percent.

A number of studies have indicated that a Laffer curve exists for corporate taxes. One study I did with Alex Brill, looking at data for OECD countries from 2000 to 2005, found that the U.S. could maximize its tax revenue by cutting the top corporate rate 8.6 percentage points, to 26.4 percent.

Money Rolls In

If the average OECD country set its rate at 26.4 percent, it would raise 3.8 percent of GDP from corporate tax revenue, according to my analysis of historical correlations. If the U.S. managed to increase its corporate revenue as a share of GDP to 3.8 percent, it would yield a startling $2.8 trillion during the next decade above what the Congressional Budget Office now projects.

Even less-rosy assumptions can’t spoil the fun. Let’s say the U.S. achieves merely the average improvement of an OECD country that reduces its corporate tax rate to 26.4 percent from 35 percent. The improvement would still generate an impressive $748 billion in additional tax revenue over the next 10 years.

All of this might force Obama to reconsider his obeisance to revenue neutrality, since under these models, tax revenue doesn’t remain neutral -- it soars. (If he really wants to deprive his supporters of billions to spend, he could lower the corporate tax rate all the way to 17.4 percent. By the rules of the Laffer curve, that rate generates the same revenue as 35 percent.)

Republicans have asserted for years that just about all tax cuts pay for themselves. They’ve almost always been wrong about that. But with regard to corporate taxes, it’s true. Laffer prevails.

Political reflex might lead Democrats to ignore the evidence that lowering the corporate tax rate increases revenue. If so, too bad, because we’ll leave free money on the table.

Monday, February 7, 2011

Obama Presses Business Leaders to Hire and Invest

President Obama urged American businesses on Monday to “get in the game” by letting loose trillions of dollars that they are holding in reserve, saying that they can help create a “virtuous cycle” of more sales, higher demand and greater profits that will put people back to work.

“If there is a reason you don’t believe that this is the time to get off the sidelines — to hire and invest — I want to know about it. I want to fix it,” Mr. Obama said in a speech to business leaders at the U.S. Chamber of Commerce.

In the speech, Mr. Obama pledged to eliminate unneeded regulations and simplify the tax code, but said companies had responsibilities to help the economy recover.

“Ultimately, winning the future is not just about what the government can do to help you succeed,” he said. “It’s about what you can do to help America succeed.”

The president’s comments came as he sought to reassure members of the business community that he was not their adversary and to mend fences with their forceful lobbying advocate in Washington.

“I’m here in the interest of being more neighborly,” Mr. Obama said, alluding to the contentious relationship he has had with the Chamber of Commerce over the past two years. “I strolled over from across the street, and, look, maybe if we had brought over a fruitcake when I first moved in, we would have gotten off to a better start. But I’m going to make up for it.”

The chamber has fiercely opposed most of Mr. Obama’s health care and banking agenda and spent more than $50 million during last year’s midterm elections to cast the president and his party as anti-business and a threat to capitalism.

But the chamber, too, is eager to tone down the rhetoric, according to senior officials there. At the height of the high-profile fight with the White House, several big-name companies left its board, citing concern about the chamber’s opposition to the administration’s efforts.

Thomas J. Donohue, the Chamber of Commerce’s president, has in the past warned of a “regulatory tsunami” that will result from Mr. Obama’s policies. In particular, he told reporters after the November elections last year that the health care law would produce hundreds of new burdens on American businesses.

But in introducing Mr. Obama, Mr. Donohue emphasized his group’s desire to work with the administration in areas where they might agree. Those include increasing free trade and exports, investing in technology and infrastructure and reducing the nation’s debt.

“I reaffirm the American business community’s absolute commitment to working with you and your administration to advancing our shared priorities,” Mr. Donohue said.

Mr. Obama’s remarks reflected the careful effort of a White House eager to seem more pro-business but anxious about the accusations of betrayal by some of the Democratic president’s most liberal allies.

The president’s basic message to the business community — “I get it,” he said of the profit-making imperative — was joined with an admonition that corporate America must feel some sense of duty as well. That effort to walk a political line appeared to please neither side completely on Monday.

Mr. Obama’s suggestion that businesses can help the economy recover by spending their reserves was met with skepticism by some in the audience. Harold Jackson, a executive at Buffalo Supply Inc., a medical supply company, called it na├»ve.

“Any business person has to look at the demand to their company for their product and services, and make hiring decisions,” Mr. Jackson said. “I think it’s a little outside the bounds to suggest that if we hire people we don’t need, there will be more demand.”

Senator Mitch McConnell of Kentucky, the Republican leader in the Senate, said in remarks Monday that “we’ll just have to wait and see whether the administration’s actions support its rhetoric.” Mr. McConnell urged Mr. Obama to prove his intentions to help the business community by doing more to push free trade agreements with Colombia and Panama.

At the same time, Mr. Obama’s decision to address the chamber in the first place has upset liberal groups, who say the president is consorting with the very forces they believe have worked to undercut his policies.

Public Citizen, a liberal group in Washington, issued a statement condemning the president’s comment that he would “go anywhere” in the world to promote trade, a line that prompted one of the few moments of applause from the crowd of business leaders.

“It’s unclear what is more mortifying: President Barack Obama choosing the club of America’s notorious job-offshorers to talk about the importance of creating American jobs, or his rallying of his fiercest political opponents to help him overcome the majority of Americans who oppose more-of-the-same job-killing trade agreements,” said Lori Wallach, the director of Public Citizen’s Global Trade Watch.

Erica Payne, the founder of the Agenda Project, a liberal organization in New York, said: “Two weeks ago, the president promised that he would work to rebuild people’s faith in government. Meeting with the biggest lobbyists in the country is hardly a step in the right direction.”

In an interview after Mr. Obama’s speech, Ms. Payne said the president’s speech had “many words, little content.”

Tuesday, February 1, 2011

Obama challenges high school students to book him as commencement speaker

President Obama challenged public high school students in Massachusetts and across the country today to book him as their graduation speaker.

The second annual Race-to-the-Top Commencement competition asks students to write essays and submit statistics that show their school is doing an extraordinary job of preparing them for life after high school. Obama will give the commencement address at the winning school.

“I’m looking for the school that’s doing the best job of preparing students for college and careers,” Obama said in a statement today. “The winning school will understand that their number one priority is making sure that our kids are learning what they need to succeed in this 21st century economy.”

East Boston High School, Somerville High and Lowell High were among more than 1,000 schools that competed in the challenge last year. The winner was Kalamazoo Central High School in Kalamazoo, Michigan.

Applications for this year's challenge must be submitted by February 25 at