Obama Opens Another Front In the War On Capital

I've lost count on how many major assaults on American business Obama has launched in just over 100 days (five , I think). The latest is his push to tax overseas earnings. This is a huge mistake. It will accelerate the drive for American corporations to move corporate domiciles. Many of our best corporations are only a fraction "American". They were started here and are nominally run from here, but many get the overwhelming majority of their revenue from non-US markets and employ more people outside of the US than they do inside the US. Thus the reasons to remain a US corporation are relatively few. They could just as easily be a Swiss corporation or a Singaporean corporation and have "US Operations". Why would Obama give these corporations an excuse to make the move? And they will move, not because they are unpatriotic or greedy. All corporations have a duty to their shareholders, first and foremost, to stay in business. Maintaining a globally competitive tax burden is critical to competing around the world, and thus, staying in business. Over time these companies will grow and the marginal hires they bring on to accomodate that growth are less likely to be in the US. Over time, these companies will lose their American character and have even less allegiance to America's interests. This amounts to a donation of some of our best institutions to foreign countries.

Ultimately, I think this assault of Obama's will fail. Many of these companies are decades old and plan to be in business in perpetuity, in theory at least. To them, Obama is a blip. He holds sway for eight years at most, possibly only two, if the 2010 mid-term elections go against him. This is a meaningless timeframe on their clocks. Rather than bow to this and damage their competitiveness, corporations will fight it or maneuver around it and wait Obama out. Any aggressiveness in securing exactly what Obama intends will entail significant coercion and nastiness. The fallout of just the fight, let alone a victory, will cause great controversy and economic damage. That is not to say that the Obama administration will swear off coercion and nastiness, but after raising hackles by employing bully tactics against the banks and against auto company creditors, is he really going to go for round three with the broad spectrum of American business? Some in his party might begin to second guess the pugilistic approach to America's largest employers, and voters might begin (or continue) to wonder 'where does it end?' Will Obama have the political capital and energy to pull it off? We shall see, the fallout of the "stress tests" and of the automaker bankruptcies will have a significant impact on Obama's ability to continue to tinker with the US economy. If history is a guide, it will not go well and voters will rein him in.

UPDATE: My skepticism is warranted. Thankfully.