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THE CONSERVATIVE REVIEW - January 25, 2011
GE's Immelt on the Hot Seat
by: Larry Kudlow
Townhall.com
Can GE CEO Jeffrey Immelt talk President Obama into a
major corporate tax cut? Immelt has been appointed to
the new Council on Jobs and Competitiveness, which
replaces the disbanded Paul Volcker Economic Recovery
Advisory Board. Immelt was a member of that original
board. Now he has a more elevated position in the Obama
2.0, allegedly pro-business, move-to-the-center Clinton-
esque White House.
Regarding the new President Obama, I am still trust but
verify. But yes, of course, Jeff Immelt is a businessman
through and through. He is a trustee of the Ronald Reagan
Presidential Foundation board, while GE is a big sponsor
of the Reagan Centennial Celebration. (Recall that the
Gipper worked for GE as a spokesman and television host
from 1954 through 1962.) He's also a registered Republican
who contributed to both Hillary Clinton and John McCain
during the 2008 campaign. And last year, he harshly
criticized Obama at a dinner in Italy, where he basically
said: Obama doesn't like business, and business doesn't
like Obama.
But what goes around comes around. Many business people
wanted senior executives in the White House, and now they
have two -- with GE's Immelt joining William Daley, the
former banker and new chief of staff.
GE had a rough time of it during the Great Recession.
But in recent quarters it has turned quite profitable;
its stock just hit a 52-week high. In an op-ed for The
Washington Post, Immelt set out his agenda for continued
economic recovery. He would focus on manufacturing and
exports, free trade and innovation.
So where's the corporate tax cut? Well, Immelt offered one
short line about "a sound and competitive tax system..."
No, not exactly a ringing call to action. But I believe he
will, in fact, push for corporate tax reform.
There's nothing more important than full-fledged corporate
tax-rate reduction in order to maximize U.S. economic
growth. At 35 percent, our highest-in-the-world corporate
tax should be knocked all the way down toward 20 percent.
And businesses taxes should be made territorial, not world-
wide, in order to stop the double-taxation of foreign earn-
ings. Business revenues held overseas, now reported to be
about $1 trillion, should be repatriated to the U.S. with
a 5 percent tax holiday.
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Businesses also should enjoy permanent 100 percent cash
expensing for new investment in plant, equipment and
research. Studies have shown that this combination by
far offers the biggest bang for the buck in terms of
additional GDP and job-creation.
And yes, broaden the base with loophole-closers. A lower
tax rate and full expensing is much more important than
all those K Street credits and deductions.
At the Republican House retreat in Baltimore a week ago,
I argued for a two-track, pro-growth fiscal plan. Reform
the business tax (Rep. Dave Camp) and bring federal spend-
ing as a share of the economy down to 20 percent from the
current 25 percent (Rep. Paul Ryan).
My friend and mentor Arthur Laffer, my co-panelist at the
retreat, argued strongly that reduced spending is itself
a tax cut. On this point, Laffer, Alan Reynolds,and Dick
Armey have all recently cited the late Nobelist Milton
Friedman, who held that government spending is the broadest
tax on the overall economy.
And let's add a rollback of Obamacare and a return to a
reliable King Dollar (referenced to gold) as additional
pro-growth measures. Finally, let's enact drill, drill,
drill. More energy across the board -- "all of the above"
-- is another great job creator.
But my former boss Jeff Immelt (GE is selling NBC Universal
to Comcast) can play a key role in a hugely important
corporate tax cut. This will incentivize firms to stay at
home instead of going overseas. It will be a huge job-
creator, reducing unemployment and playing an important
part in deficit reduction. According to the Congressional
Budget Office, a 1 percentage point increase in GDP above
the meager 2.5 percent baseline would lower the 10-year
budget gap by nearly $3 trillion.
Growth solves a lot of problems. Can Immelt get the job
done?
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