Obama's Labor Day gift to the special interests

Promising more stimulus spending in a speech to labor union members and officials, President Obama four times derided Republican coziness with “special interests” — his standard trope.

But surely Obama knows that union political action committees have spent far more money so far in the 2010 elections than the PACs in any other industry. And he should know that his proposal for an unaccountable “infrastructure bank” is a recipe for a politically charged, corporate-welfare slush fund.

The president's Labor Day speech highlighted the gaping chasm between his reformer rhetoric and his cozy relationships with special interests.

Obama on Monday charged that during the Bush administration, “the decks were too often stacked in favor of the special interests and against working Americans.” He said Republicans want the keys to the car and would “let the special interests ride shotgun.” He doesn't define “special interests,” and so we can only guess at exactly what he means.

One measure would be PAC spending. Labor union PACs so far this election have spent $43 million, with $40 million going to Democrats.

Consider the industries Obama might be deriding as “special interests”: oil and gas, mining, Wall Street, commercial banks, defense contractors, HMOs, telecom, and lobbyists. Add together the PACs of every company and every trade group in all of those industries, and you're still short of what the unions have spent. (By the way, those industries' PACs have given more in aggregate to Democrats than to Republicans.)

So, the unions are clearly a special interest, and Obama's Labor Day speech to them included some deck stacking in their favor. If Obama is true to form, his proposed $50 billion in new infrastructure stimulus is a gift to Big Labor.

Infrastructure money in Obama's first stimulus was all governed by the Davis-Bacon Act, which basically prohibits local governments from seeking savings by hiring nonunion workers. That suggests that a large chunk of this proposed $50 billion would go to union coffers — and then come out the other end as PAC spending for Democrats.

Beyond the price tag, other aspects of the $50 billion proposal undermine Obama's claim to be battling the special interests. Because it can disburse money outside the appropriations process, the infrastructure bank has the upside potential of being immune to congressional earmarking. On the downside, it could be used as a slush fund for presidential favorites.

The closest thing today to Obama's proposed infrastructure bank is the Export-Import Bank of the United States — a government agency that finances U.S. exports. It's a nice pot of cash for the special interests: A majority of Ex-Im's finance dollars are spent subsidizing one company — Boeing.

Ex-Im also shows how such government “banks” are subject to political pressure. Earlier this year, the agency rejected a subsidy request from a Wisconsin company, Bucyrus, which was seeking a contract to build a power plant in India. Wisconsin Sen. Russ Feingold, a Democrat facing a difficult re-election battle this year, leaned on the administration to reverse its decision and bypass the environmental rules that had killed the deal. Ex-Im listened to Feingold and did an about-face — and Feingold sent out a press release bragging about it.

If Feingold hadn't been up for re-election, would Bucyrus have gotten its subsidy? Imagine if there had been two GOP senators from Wisconsin — would they have been able to win over Ex-Im, whose chairman is an Obama appointee?

Ex-Im's example shows us that Obama's infrastructure bank runs a high risk of becoming a source of corporate welfare and union payoffs.

Obama's proposal to permanently extend the research and development tax credit is a mixed bag. Congress' recent games with the credit — allowing it to expire or almost expire every couple of years — were primarily a fundraising tool for members of the Ways and Means Committee. Making it permanent reduces graft.

But why should research and development be favored over other spending? We're not talking about basic scientific research — this is a subsidy to businesses trying to develop new commercial technologies. If it's worthwhile research, it provides its own reward in the form of profit.

Obama plans to offset the spending and targeted tax breaks by raising the top income tax rates. Making rates higher with more loopholes is the opposite of transparency and tax reform, and it's playing into the hands of the special interests who can hire tax attorneys.

This is a president who is interested in picking winners and losers — and when that's the object, the special interests always come out on top.

Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.

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