Pretty Brazen, Even for a Politician

I have often described this statist feedback loop:

  • Create government program
  • Government programs messes up certain aspects of the market
  • Blame such messes on "failure of markets" or capitalism or even the rich, rather than the government program
  • Create new government program to fix problem created by last program
  • Repeat

Obama's new political strategy seems to be even more brazen

  • Democrats pass new program over Republican objections
  • New program has unseemly subsidies for rich people
  • Blame subsidies on Republicans, to the point of using subsidies as example of bankruptcy of Republican party

Specifically, tax breaks for corporate jets:

The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.

“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”

But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.

Which is not to say that the losers in the Republican party would not likely have supported the same plan had it been their idea.

By the way, this is nearly exactly what Obama has been doing with those so-called special subsidies for oil companies.  This subsidies are in fact the identical tax breaks that all manufacturers receive that allow them to accelerate expensing of capital investment.  This is a tax policy that has enjoyed bipartisan support and no one is suggesting should be eliminated in general -- just eliminated for industries that have bad PR.

  • Mike S

    When are Obama and his wife giving up their jets?

  • Mark

    Ah the reason they needed to add the accelerated depreciation, was because Obama and congress mouthed off about the industry in the depth of the recession. Remember the auto manufacturers flying to DC? Remember Citi being forced to cancel an order because they got tarp.

    Well before they mouthed off the industry was getting few if any new orders, after they mouthed off, companies and other rich folk cancelled existing orders en mass, causing 100+K in layoffs of middle class folk who either pilot the planes, service the planes or manufacture the planes. I got caught in layoffs when my former company had to cut back because orders died.

  • Mark

    And people have the wrong idea about corporate jets. Here on the wiki is a picture of the jet I worked on.
    http://en.wikipedia.org/wiki/Cessna_CitationJet

    Notice it isn't some huge plane where the insides look like a living room with a private bar. It is a pretty small affair and that is typical of the Bus jets.

    And their use actually saves companies considerable money, especially if CEO's have to travel to plants that are a bit out of the way and will take 2 or 3 transfers to get to location - rather than a direct flight from a private jet.

    You are paying your CEO's and upper executives upwards of $20,000 per hour. If the direct flight on the business jet takes 3 hours, each way and they can discuss business in private - so work can be done vs 12 hours each way waiting in airports and transferring and not being able to discuss any private corporate matters, you have with one trip saved the company $500,000. A good value considering one of these jets is only in the $10 million range.

  • Rob

    I spent a good portion of my career at Intel. Their corporate jets going up and down the west coast are all 40-seaters with less legroom than Southwest. They were used by a significant portion of Intel's non-executive level of employees. And even with the low-level of comfort, you'd still see Craig Barrett flying on these things from time to time.

    Tax breaks might be a problem -- real loopholes abound. But 95% of the problem is overspending, which the public dearly doesn't want to pony up to (a la Greece).

  • me

    I disagree, Rob - Tax breaks are a huge problem. They complicate revenue collection and allow parties who are sufficiently motivated to minimize their tax load. Compare to a system of, say, collecting 1% of every transaction in the US or 1% of the declared value of property owned by any citizen (with the proviso that undeclared property falls to the state and the state has the right to buy any property at the value declared)

  • LoneSnark

    As far as tax breaks go, accelerated depreciation is not a tax break in the long haul, merely a back-loading of taxes. The companies were going to write off the depreciation eventually, the law was changed to merely allow them to write it off now rather than later.

  • ArtD0dger

    I'm not sure blaming the Republicans is more than incidental. Obama's real beef is with the corporate jet set. From Obama's point of view, he duly (and lavishly) greased their palms, just as he did with so many of his other constituencies. However, their quid pro quo was to deliver not votes, but a good economy. This was to happen not by anything so impersonal as the Keynesian multiplier, but by the contracted agency and intervention of the corporate cargo jet spirits. Obama was putting them on notice that having busted a deal, they must face the wheel.

    He just blamed the Republicans because, you know, you always blame the Republicans.