Explaining Southern California's economy

Obama corporate tax cut: The fight over 3 percent

Obama Visits Master Lock Company, Discusses Economic Plan In Milwaukee

Scott Olson/Getty Images

MILWAUKEE, WI - FEBRUARY 15: U.S. President Barack Obama speaks to workers at the Master Lock factory on February 15, 2012 in Milwaukee, Wisconsin. Obama applauded the company, which he cited in his State of the Union address, for bringing back 100 jobs to the U.S. from China. (Photo by Scott Olson/Getty Images)

The Obama administration has come out with a proposed cut to corporate taxes, from the current 35 percent to 28. The White House says the cut would be "revenue neutral," meaning that whatever revenue is lost in that 7 percent solution would be made up by eliminating tax breaks and loopholes. 

Republicans are allowed to like this — but not too much. Their pool of candidates all want to cut corporate taxes as well, but by larger margins than Obama. Mitt Romney wants 25 percent, while Gingrich, Santorum, and Ron Paul all want to go lower. Paul, in fact, wants to cut corporate taxes down to 15 percent.

Romney's plan is the only realistic alternative to Obama's. Which raises the question: "Will Republicans and Democrats really fight it out over three percent?"

Of course they will, and it may come down to who's plan is really the more "revenue neutral." On its face, Obama's is, while Romney can't get his additional three percent without cutting spending. You can see the difference: Obama's plan gives with one hand but takes with the other; Romney's gives and then gives some more, by using corporate taxation — or lack of it — to reduce the size of government.

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Man defies Newt Gingrich, installs gun rack in Chevy Volt

First, Newt Gingrich insisted while on the campaign trail that you can't put a gun rack in a Chevy Volt, the gas-electric hybrid vehicle that Newt referred to as an "Obama car." 

Then General Motors, the company that builds the Volt, took the high ground in a post titled "We Did Not Engineer the Volt to Be a Political Punching Bag." The company — famously bailed out by a combination of the Bush and Obama administrations, the pushed through bankruptcy before emerging as a serially profitable enterprise — pointed out that you can put a gun rack in a Volt, but asked why you would want to. It's a durn sedan, after all.

The chap above set out to prove Gingrich wrong, quote literally. What's impressive here is not just that you can install a gun rack in a Volt, but that you can install one in about half an hour using $7 in materials.

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The DeBord Report on 'America Now with Andy Dean'

I did my weekly Economy Report on "American Now with Andy Dean" a day early this week — Thursday rather than Friday. Andy very kindly informed me that the first step to leaving the liberal matrix is admitting that you have a problem, but I think I need to know what the other eleven steps are before I'm fully prepared to go down that road. In any case, we ran through the business news of the week, which included President Obama's budget; General Motors' record 2012 profit and Mitt Romney's view of the bailouts; the thorny question of whether "carried interest" income earned by folks in the financial sector should be taxed as regular income; and the whole dustup over Starbucks policy toward gun owners.

Listen in! It was a snappy discussion, as usual. I come in about halfway though.

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The parallel universe of Mitt Romney's auto industry rescue

Republican presidential hopeful Mitt Rom

Emmanuel Dunand/AFP/Getty Images

Republican presidential hopeful Mitt Romney holds a Caucus election night at Red Rock Casino in Las Vegas, Nevada, February 4, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)

Mitt Romney is doubling-down on his negative view of the the 2009 bailouts and bankruptcies of General Motors and Chrysler. In late 2008, he argued in the New York Times that a bailout of Detroit would mean the end of the U.S. auto industry. Today, in the Detroit News, he refuses to back off from his earlier position, says that a "managed bankruptcy" of GM and Chrysler was what was needed all along, and that the Obama administration practiced:

"...crony capitalism on a grand scale. The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.

And:

Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.

By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.

Thus, the outcome of the managed bankruptcy proceedings was dictated by the terms of the bailout. Chrysler's "secured creditors," who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs' union-boss-controlled trust fund received a 55 percent stake in the firm.

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Obama's 2013 budget: The part rich people should read

Gulfstream V

Phil Vabre/Wikimedia Commons

Sorry, wealthy corporate folk. President Obama wants to take away your precious private jet depreciation schedule.

President Obama released his 2013 budget today. Conveniently, the U.S. Treasury emailed me a summary of the so-called "Green Book," its explanation of the President's recommendations. It's fairly dense. But if you're rich, this is the part you'll want to study, because it's all about how the wealthy in America are taxed, right down to their private jets and interest on hedge-fund earnings (I've edited for length):

Allow the 2001 and 2003 income tax cuts to expire (including the low tax rate on dividends) for households making more than $250,000 per year and restore the estate tax to 2009 levels....Sustaining these unaffordable high-income tax cuts would require either borrowing more, increasing taxes on the middle-class, or deep cuts in other parts of the Budget that help seniors, the middle-class, and the most vulnerable.  The President’s Budget would instead reflect shared sacrifice by allowing income tax rates that exclusively affect upper-income households to return to the levels they were at throughout most of the 1990s...

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