Morici: Obama, GOP Make No Sense on Taxes and Spending

NEW YORK (TheStreet) -- Republicans are from Venus and President Obama is from Mars. Nothing better demonstrates this than their stances on taxes, spending and jobs.

Obama wants to reform corporate taxes -- shut loopholes, impose a mandatory levy on profits earned abroad and lower rates overall -- but to also raise some additional revenue to fund his jobs initiatives.

The corporate tax code is too complex and encourages tax avoidance more than sound investments. However, rates are much higher than in competing nations, and the United States taxes profits earned outside its territory whereas other governments do not.

All this encourages U.S. multinationals to invest and create jobs abroad and keep profits parked there, where they can't foster American growth and jobs. Firms such as Eaton ( ETN) and Sara Lee, now Hillshire Brands ( HSH), have even moved corporate headquarters to low tax jurisdictions.

By collecting more taxes on U.S. and foreign operations, the president would encourage more factories and firms to leave the country, save their marketing activities.

Obama wants to spend the revenue bonanza on much needed but poorly conceived infrastructure projects -- federally supported projects import too many materials from China and require Davis-Bacon union jobs -- education and jobs training.

The purpose of stimulus money is not to boost employment in the Middle Kingdom, and after the Detroit and General Motors ( GM) bankruptcies, no sane person would advocate strengthening unions.

American schools and universities suffer not from too little money. The real problems are: regulations and school cultures that handicap teachers from intelligently addressing a diverse student population; politically conservative parents who place too much emphasis on sports, liberal parents who value too much community service, and neither valuing enough academic excellence; and schools and universities run by incompetent bureaucrats.

The federal government already has too many jobs training programs that don't train much of anyone for a job.

For its part, the GOP House wants to extract spending cuts to reduce the budget deficit but won't accept measures really needed to accomplish political success -- higher payroll taxes and more prudent health care regulations.

Americans are living longer and can work longer, the social security retirement age should be raised to 70; however, the federal pension system needs to address other challenges.

Americans working in the private sector can no longer count on employers to provide decent pensions, and IRAs and other tax-deferred savings schemes are not making up the difference -- for reasons including Americans' inability to save, the paucity of tax incentives, and lower interest rates and stock market returns.

Demographics require raising the retirement age, and politics will mandate bigger benefits once people get old enough. Republicans don't even want to talk about the latter but in the end, old people vote, and they will vote for Democrats who propose an expanded system once President Obama exits the scene -- he won't even recognize the need to raise the retirement age.

On health care, the nation spends too much -- 50% more than the private German and Dutch systems, who better regulate prices and get better results. Obama Care is not the answer -- subsidizing a broken system won't help -- but neither is the market system we had before it.

If the Republicans are serious about replacing Obama Care -- and slicing the Medicare and Medicaid spending -- they must embrace price regulations but that has as much chance of happening as I do playing shortstop for the New York Yankees.

This fall when the great America drama reprises -- negotiations between the president and Congress over the raising the debt ceiling -- Netflix could provide a great public service distributing gratis an appropriate classic: "Ship of Fools"!

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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