Democratic desperation fills the air as Election Day nears. The party is scrambling to find wedge issues that will save the Senate. Economic patriotism is the latest rallying cry of scared senators who are calling on President Obama to act unilaterally to prevent companies from using “corporate inversions” to lower their tax burden. Unilaterally in this context is a synonym for “unconstitutionally,” and Mr. Obama knows it.
While running for president, Mr. Obama brought adoring crowds of left-wing supporters to their feet with fiery condemnations of the Bush administration’s expansion of executive authority. “I taught constitutional law for 10 years,” Mr. Obama said in 2008. “I take the Constitution very seriously. The biggest problems that we’re facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all, and that’s what I intend to reverse when I’m president of the United States of America.”
Mr. Obama has accelerated, rather than reversed, the expansion of White House authority. Now that he has the keys to the Oval Office, he brags of his ability to change the law with his “pen and phone” and mocks his critics by daring them to “sue me” if they don’t like it. The loudest opponents of President Bush’s power grabs have become the biggest cheerleaders for President Obama’s power grabs.
Democratic Sens. Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island and Richard J. Durbin of Illinois dispatched a letter to the president saying the issue of inversions “justifies immediate executive action.” Corporate inversions happen when a company located in a high-tax jurisdiction reincorporates elsewhere to take advantage of a fairer tax rate. Since the United States has the highest corporate-tax rate in the developed world, that means relocating anywhere else.
Corporations that reduce their tax burden can invest their profits in research and development, hiring, expansion and even pay increases for employees. All are better options than handing money over to the government, but liberals are painting smart management as unpatriotic.
The trio of liberal senators says there’s no time to do what they want properly by enacting the law that they proposed, the Stop Corporate Inversions Act. November is only a few months away, after all. Outlawing moves by corporations is no different than saying a California family can’t move to Texas to escape the Golden State’s notoriously high tax rates, but somehow it’s different if it involves a corporation.
When Walgreen Co., the Deerfield, Ill.-based drugstore chain, considered a corporate inversion, Mr. Durbin delivered a threat, telling the company that it was turning its back “on the very people that have allowed Walgreen’s to thrive and prosper.” Walgreen got the message loud and clear. Fearing political reprisals and the loss of government contracts, the firm dropped its plan and elected to pay higher tax rates instead. Are we expected to stand up and salute?
“Economic patriotism” is bad economics. Corporate mobility is an essential check on government power and greed. If rates grow too high — as they are now — companies will just move away.
Removing that restraint on government, particularly through unconstitutional action, would be a grave mistake, as Mr. Obama understood not so long ago.