Category: Economy
Hits: 617

Then the president talked about early-childhood education, raising the minimum wage and closing tax loopholes to fund infrastructure. And, after a reporter asked, Obama said he was open to reforming corporate taxes.

As new eras go, not an encouraging first day.

Still, the US economy has lately come to resemble a racehorse, quivering behind the starting gate. Unemployment is falling, manufacturing is healthy, energy production is booming and the economy posted a 4 percent growth rate from April through September.

More than at any time since the Great Recession, Washington has opportunities to remove obstacles to robust growth. So let's examine the potential upside, in order of probability.

Trade deals

The president's pursuit of new trade agreements has been halfhearted amid Democratic opposition in the Senate.

On Wednesday, he expressed optimism that a potential pact with Pacific nations could get through Congress.

Success would help the global economy while boosting US exporters. And, when she was in San Diego last year, Commerce Secretary Penny Pritzker said improvements to the 20-year-old North American Free Trade Agreement could add $1 trillion a year to the continent's trade activity.

If anything, recent turmoil in Europe and Asia has highlighted the importance of trade. The election has improved the odds of tangible progress.

Tax overhaul

The president agrees with leaders of both parties that the corporate tax code is in dire need of reform.

At 39.1 percent, the combined state and federal US corporate rate is the highest in the developed world -- which averages 25 percent. This encourages investors to start companies elsewhere and gives foreigners a competitive advantage (cheaper after-tax capital, for starters) when they invest here.

Worse, a special levy on foreign earnings further discourages American ownership and has prompted a wave of "inversions" to move headquarters to low-tax nations.

At the same time, ever-growing loopholes require prudent CEOs to spend billions on lobbyists, lawyers and accountants to create avoidance strategies.

Yet, agreeing on problems doesn't equate to consensus on solutions in Washington. The president wants any streamlining to increase the federal take, while Republican leaders have insisted on revenue neutrality.

My hunch is that Republicans could convert some Democrats by sincerely attacking the "corporate welfare" of loopholes.

And some analysts see potential for a compromise that would allow tax collections to increase. Republicans would get funding restored for the military, and Democrats would get money for infrastructure.

So corporate tax reform could happen next year.

Some optimists, led by Rep. Paul Ryan, R-Wis., think Congress could pull off a bigger tax deal that includes individual rates.