Obama Jobs Math Doesn't Add Up

Of course, there’s only so much government can do. Job creation will ultimately depend on the real job creators: businesses across America.

Surrounding these words in his Tuesday “jobs speech” at the Brookings Institution, President Barack Obama offered an outline of plans to further involve government in the economy at the cost of billions of dollars to the American taxpayer.

Obama’s speech was nested in too-familiar rhetoric of problems he “inherited”, attacks on Congressional Republicans, and — despite his best efforts to appear otherwise — a continued misunderstanding of the fundamentals of a free-market economy.  

The president claimed that his “stimulus bill” — the $1.2 trillion spendathon passed last winter — has already created or saved 1.6 million jobs.  In fact, since he was inaugurated, more than 3.3 million Americans have lost their jobs, and the 1.6 million jobs claim is the upper end of the Congressional Budget Office’s over-optimistic assessment, with the actual number likely less than half of that.

Obama said he is “still committed to halving the deficit we inherited by the end of my first term.” However, as Heritage Foundation federal budget analyst Brian Riedl points out “That’s not saying much.  When the deficit triples in your first year as president, cutting it in half is not too difficult.  Three events: the end of Iraq war, the end of the recession, and the end of stimulus spending would by themselves cut deficit in half. But even given that, I don’t think he’ll be able to cut deficit in half because the president’s new spending proposals will likely keep the deficit over $1 trillion permanently.”
Obama recounted aspects of the American Recovery and Reinvestment Act (the “Stimulus” bill), including tax credits, extending unemployment relief and COBRA subsidies to those who have lost jobs, helping plug state and local governments’ budget holes, and “put(ting) Americans to work doing the work that America needs done.”

What does Obama think needs to be done? “Doubling our capacity in renewable energy like wind and solar; computerizing medical records to save money and lives; providing the largest boost to medical research in history; renovating classrooms and school laboratories; and upgrading roads and railways as part of the largest investment in infrastructure since the creation of the Interstate Highway System half a century ago.”

President Obama came back to “clean energy” seven times during the speech, despite the fact that new jobs in these areas are all but non-existent. Ironically, just a few hours before his speech, Vestas Wind Systems announced that they were going to fire 500 workers at their Windsor, Colorado wind turbine blade factory due to the weak economy and low energy prices.  Colorado should probably consider itself lucky, given the results of a Spanish study which shows “with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created.”

But how does one square a “stimulus” bill which had to be rushed through immediately with an intention to drag out the spending over a far longer time period than the usual duration of a recession?  Perhaps because what the Democrats are intending to stimulate is not an economic recovery but a lessening of their expected losses in the 2010 elections.

It was an unintentionally funny moment when President Obama reminded listeners that he “asked Vice President Biden and others to make sure to the extent humanly possible that the investments were sound, the projects worthy, and the execution efficient.” Ask a man who has never had a private sector job to opine on sound investments, a man who uses 20 minutes to barely get one concept across to judge efficiency?

After discussing our recent economic history, Obama turned to an outline of his plan to promote job creation.  The plan, which was notable for its lack of numerical specifics, focuses on four areas:  Small business job creation, more infrastructure “investment”, more energy efficiency, and extending various forms of financial relief to citizens and state and local governments.

The president noted that “Over the past 15 years, small businesses have created roughly 65 percent of all new jobs in America.”  He then proposed “a complete elimination of capital gains taxes on small business investment along with an extension of write-offs to encourage small businesses to expand in the coming year. And I believe it’s worthwhile to create a tax incentive to encourage small businesses to add and keep employees, and I’m going to work with Congress to pass one.”

While this idea is fine as far as it goes, it leaves one wondering whether the administration has an unshakeable bias against big companies just for being big (something also seen in currently proposed financial reform legislation). If capital gains tax cuts for business investment or incentives to hire employees are good for a small company, why not for IBM, ExxonMobil, or John Deere?

Obama also proposed “to waive fees and increase the guarantees for SBA-backed loans”. He then proceeded to breezily mention one of the most controversial aspects of his plan: “And I’m asking my Treasury Secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses.”

In a response for the Republican Study Committee, Congressman Tom Price (R-GA) argues that “TARP funds are required by law to go toward deficit reduction. TARP is not a slush fund the President can dip his hand into whenever he needs more taxpayer money.”

Obama called for more “infrastructure” spending, by which he means not only roads and bridges, but also “Superfund sites, broadband networks, and clean energy projects.”  If this spending is as ineffective and poorly targeted as the initial infrastructure spending — appropriately enough for projects being judged by Joe Biden — it will be more taxpayer money down the boondoggle sewer.

Obama will ask Congress “to consider a new program to provide incentives for consumers who retrofit their homes to become more energy-efficient, which we know creates jobs, saves money for families, and reduces the pollution that threatens our environment.”

Beyond the fact that people tend to make their homes more energy-efficient when such actions are cost-efficient, one wonders just what pollution Obama is talking about.  EPA data show a consistent 30-year improvement in American air quality in every measured pollutant. American air is the cleanest it’s been since the Industrial Revolution. Yet again, Congressman Price’s words apply as the president will try to expand the Recovery Act to pay for the “energy efficiency and clean energy jobs which have been proven to be particularly popular and effective.”  I’m sure free beer would be popular too.

Finally, Obama will work to “extend the relief in the Recovery Act, including emergency assistance to seniors, unemployment insurance benefits, COBRA, and relief to states and localities to prevent layoffs.”  While most Americans have sympathy for those who have lost jobs, the “relief to states and localities” simply represents the Administration transferring money from taxpayers to prevent the firing of union-dues-paying government workers.  Indeed, of the (mis-)reported “creating or saving” of over 600,000 jobs, more than half were in education (although the vast majority were truly not at risk of being fired.)  

Obama returned to the subject of the TARP, noting that it “is expected to cost the taxpayers at least $200 billion less than what was anticipated just this past summer… So this gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.” But even the magical Obama can’t save money he plans to spend. Echoing Congressman Price, Heritage analyst Riedl points out that “TARP was created to stabilize financial markets.  That job seems to be finished.  It’s time wind it down and use the money for deficit reduction. TARP was never meant to be a permanent slush fund for Congress and the President.”

Barack Obama’s job speech was a paean to free enterprise given with fingers crossed behind his back; for all his talk about real and sustainable job creation coming from the private sector, almost every proposal he offered was more of the same bitter medicine the American public has been fed for the past year.  He says small business must create jobs, then argues to divert billions of taxpayer dollars for his “clean energy” pipe dream. He blames George W. Bush and Republicans in Congress for fiscal irresponsibility while putting in place budget plans which are likely to triple our national debt in the next decade by doubling real welfare spending and by “government spending a peacetime-record 26% of GDP” this year with little relief in sight thereafter.  (And that is without spending for Obamacare.)

Hours after the president’s speech, Rasmussen Reports released the results of a new poll showing 58% of likely voters opposed to giving bailout money to states, 56% opposing a second stimulus, 53% believing the economy will be helped more by actions of the private sector than of government, and 59% believing that increased government spending will hurt the economy.  

Given the Democrats’ continuing rush to expand government — what Congressman Price called Obama’s “reiterated faith in a flawed philosophy” — it’s no surprise that 67% expect no improvement in unemployment a year from now.