The Road to Jobs

Tonight, I will be in St. Louis for an American Solutions’ Real Jobs Summit and will stay afterward to meet attendees and sign books.  If you are in the area, you can find out more information about the event and RSVP here.

St. Louis is a timely place to have a Real Jobs Summit because a recent article in the St. Louis Post-Dispatch provided the perfect illustration as to why the stimulus has failed to revitalize the American economy. 

Titled, “Federal stimulus funds help community groups, nonprofits,” the story is supposed to be a positive piece highlighting some of the local small businesses and charities receiving stimulus money.  In reality, it is unintentionally damning of the entire economic model behind the stimulus. 

Some of the grants and spending highlighted in the piece include:

• $2 million to retrofit or replace 575 diesel engines to reduce emissions on public vehicles;
• $622,000 to rehab and paint the steel gates of dams;

• $25,000 to hire a music director.

To be clear, many of the jobs funded by stimulus money are the type that any community would love to have.  After all, who could object to the hiring of a music director?

But ask yourself, are these really the type of investments that will jump start the economy and set the stage for long-term economic growth?  What happens when all the gates are painted and the engines are replaced?  Will these jobs spur the creation of others?  


The story shows the fatal conceit underlying the Keynesian economics that are the basis for these kinds of stimulus bills: It assumes that government can spend your money more effectively than you can.

If there is any doubt of this arrogance, consider that another grant highlighted in the story provided $3.3 million to train people for 700 green jobs that are expected to emerge in the area over the next two years.

As you may recall, the Obama administration warned that without their stimulus bill, unemployment would rise above 8%.  Now, with the stimulus money half spent, unemployment is at 10%.  Considering this failure, it seems hard to believe the government is smart enough to know when and where 700 new jobs will emerge.

As I write in To Save America (now a New York Times bestseller for the fourth straight week — purchase from here; buy autographed copies here):

“The Left like these stimulus bills because they get to use big government to allocate massive sums of money to their favorite projects and interest groups. But this approach never improves the economy, because the underlying Keynesian economics are wrong. Runaway government spending, record deficits, unsustainable federal debt, and hundreds of billions in increased welfare spending will not renew the economic boom. Trickle-down bureaucracy does not create wealth.  Obama’s stimulus simply borrowed close to $1 trillion from the private economy to pour a trillion back in through increased government spending, producing no net economic gain.

“This policy has failed time and time again. The economy grows not through ever greater spending, but through policies that create jobs, starting and expanding businesses, and entrepreneurship.”

In the same article, the chief economist for Vice President Biden, who is overseeing the stimulus, calls this sort of thinking “terrible economics” and “pretty heartless.”  He says, “When the economy is significantly underperforming, stimulus funding is not redistributive at all. It’s about growth.”

Sure.  Now that those gates have been painted, the St. Louis economy will grow like gangbusters.  

I look forward to discussing a real plan for job creation tonight in St. Louis.

A Double Dip Recession? 

At best, the Obama stimulus has failed to jump start the economy as promised.  However, there is increasing evidence that President Obama’s policies are actually making it harder for the economy to recover. 

As I write in To Save America:

“The recession officially began in December 2007, according to the National Bureau of Economic Research. The average recession since World War II has lasted ten months, with the longest spanning 16 months.  But the Bush-Obama recession lasted almost two years thanks to the outdated Keynesian policies adopted by both presidents…Moreover, the weak rebound violates a historic rule: the deeper the recession, the stronger the recovery. Based on the severity of the past recession, real growth over 2010 should be 6% to 8%.”

This lack of a strong recovery poses the unlikely but still worrying possibility that America may be headed for a so-called “double-dip recession,” in which the economy begins to recover but then falls back into negative economic growth.  Consider:

• Two weeks ago in this newsletter, we discussed the dismal private-sector job creation numbers.  Of the 431,000 net new jobs created in May, only 41,000 were created in the private sector.  The rest were temporary census jobs. Meanwhile, 322,000 people gave up looking for employment altogether.

• Unemployment claims increased in the second week of June.

• Corporations are hoarding a record amount of cash – $1.8 trillion – out of fears caused by the global debt crisis and deflation concerns.

• In May, sales of existing homes fell after the homebuyer tax credit expired on April 30 while foreclosures have kept a torrid pace, leading to high inventory levels, which will suppress housing values. 

Worse, there are a number of tax hikes that will begin in 2011. The highest personal income tax rate will rise from 35% to 39.6% (the expiration of the Bush tax cuts), the highest federal dividend tax rate will jump from 15% to 39.6%, and the capital gains tax will rise from 15% to 20%.  In addition, the estate tax, which temporarily dropped to zero in 2010, kicks back in at a whopping 55%. 

These expected tax increases may actually be inflating economic activity this year as companies and investors shift profits they would normally take in 2011 to 2010. That means 2011 may be even tougher for job creation. 

The Road to Jobs

To be clear, these worrying trends may simply be signs of a faltering recovery rather than a coming economic contraction.  However, with another weak jobs report expected for June, there will inevitably be calls for action from Congress.

We have had three straight stimulus bill failures.  The $150 billion Bush-Pelosi stimulus bill failed.  The Bush-Pelosi housing stimulus bill failed.  And now, the evidence is clear that the Obama stimulus bill has failed. 

So the question before us is simple.  Will we enact a fourth big government, Keynesian stimulus?  Or will we learn the lessons of history and pass an economic growth bill modeled after the Kennedy-Reagan tax rate cuts that created unprecedented economic booms? 

Fortunately, there is a bill before Congress based directly on that Kennedy-Reagan tradition.  It is the Economic Freedom Act (HR5029), sponsored by Congressmen Jim Jordan (R-Ohio) and Jason Chaffetz (R-Utah).  The centerpiece of this bill is five bold tax cuts modeled after the tax cuts in the American Solutions Jobs First Plan. 

These bold changes to our tax system would provide small businesses with immediate liquidity and change the underlying tax structure of America to set the stage for long term economic growth.  They include:

• Reducing the payroll tax by half for 2010 to provide immediate liquidity for companies
and employees;

• Eliminating the capital gains tax to encourage investment in new companies;

• Reducing the corporate tax rate to 12.5% to make us competitive globally;

• Permanently eliminating the death tax so small businesses and family farms can continue creating jobs for future generations;

• Providing immediate business expensing so American workers have the best equipment and are the most productive.

At American Solutions we are encouraging our members to contact their representatives in Congress and ask them to support HR 5029. You can click here to help.

The choice before us is clear. 

Will we enact more of the same failed, Keynesian stimulus bills that rely on government bureaucrats to distribute our money as they see fit? 

Or pass HR 5029 to provide permanent tax relief that will free up entrepreneurs and businesses to make investments that will lead to an explosion of new jobs and productivity? 

You might even say that HR 5029 would be change we could believe in.

Your friend,


PS. The Catholic News Agency called Nine Days that Changed the World “one of the truly great Catholic documentaries.”  You can read more coverage and reviews of Nine Days that Changed the World at and buy it here.

Newt’s Quick Links

• Conservatives have long been concerned about the impact of the welfare state on limited government. George Carey examines this issue in his piece posted at Renewing American Leadership.

• The Americano writes about the increased violence across the Mexican border.