Yesterday, Congress took action to correct an EPA rule that would have unnecessarily driven up energy prices for consumers. Though only a small piece of the agency’s energy efficiency rules, the EPA put a ban on large “grid-enabled” water heaters that actually help control water usage during peak hours. AAF has found that combined, the EPA’s rules have the potential to raise consumer electric bills by over 10 percent. 

The White House and Congress were able to celebrate the bipartisan passage of the Doc Fix bill yesterday. AAF’s Douglas Holtz-Eakin has written before of the importance of repealing the SGR and finding a way to “[reimburse] doctors, introduce structural changes to Medicare, extend CHIP, and more than balance over the next 20 years – without raising taxes.”

ICYMI: Speaking of celebrations, AAF was excited to celebrate our fifth anniversary last night with special guests including Speaker Boehner, Maria Bartiromo, and Charles Krauthammer. You can catch up with how the Forum has grown in this short video.

Eakinomics: Clintobamonics

Hillary Clinton foreshadowed her tax policy Monday in New Hampshire. Unfortunately, it looks like more of the same. On style, it is populist politics trumping good policy. Having labeled financial market trading as “playing games” she promised to “take a good look at what is now being done in the trading world” — code words for higher taxes. This continues the Obama technique of deploying tax policy for the purpose of picking winners and losers, and especially punishing political enemies.

It also reveals an appalling ignorance of how the economy works. “Trading” does not exist in isolation. The financial sector exists as the economic blood supply for Main Street business. When a bank makes a car loan, it sells it off to free up capital to make a working capital loan to the dry cleaner down the street. The flip side of that transaction is a “trader” buying the car loan, bundling it with others, and selling pieces of the bundle to interested investors. 

A small manufacturer might want to sell its wares in Brazil, but is worried about a rising dollar undercutting the value of foreign profits. It can hedge its currency risk using currency futures and options, making it willing to expand it overseas sales and raise its production and employment. The flip side of this transaction is a &lldquo;trader” selling the future or option. To balance his or her books, they would have to undertake a compensating transaction to balance their risk exposure. Viewed in isolation, evidently this is “playing games.” Unfortunately, expanding U.S. overseas sales is not a game and that is what is at stake.

It also reveals a fundamental aversion to the tax reform that everyone except Obama and, now, Clinton understands is needed. Tax reform at its best is not done for businesses alone. Tax reform looks at the system — personal plus business — and seeks to lower rates and broaden bases so as to place as few tax hurdles as possible in the way of economic growth. It seeks to get taxes out of business decisions by leveling the playing field between excavating, producing, selling, and …. trading (as well a broad array of other economic activities).

Tax policy is about the quality of the tax code. It is much more than taxes going up or down. It is certainly a lot more than continuing the Obama tradition of picking winners and losers using political criteria.