In my column for The Week I discuss the problems with Rick Santorum economic plan:
Santorum’s concern for the American middle class has been one of the most attractive features of his candidacy for the Republican nomination. Alone among the Republican candidates, he took note of the freezing of upward mobility and the stagnation of middle-class wages even before the financial crisis of 2008.
So what’s his plan? Santorum has proposed a special lowered rate of federal tax for manufacturing.
A minute’s thought will suggest why this is a poor idea. What is manufacturing anyway? Building a car is manufacturing, obviously. What about building a mobile home? What about building a non-mobile home?
Assembling a computer out of parts is likewise obviously manufacturing. What about assembling a taco?
Clearly, talking on the phone is not manufacturing. What about operating a computer help center? No? But what if the center is operated by the computer assembler? Yes? Okay, now suppose the computer assembler has 80 percent of its staff on the phones, and only 20 percent on the shop floor.
The definitional problems are insuperable, and will only plunge the corporate tax code into ever more fathomless complexity.
Santorum has arrived at this impossible outcome because he has limited his arsenal of policy instruments to one instrument only: taxes, and specifically, the reduction of taxes.