“A virtuous and industrious people may be cheaply governed.” — Ben Franklin
Keynesian economists in the White House and on Wall Street (they’re everywhere) are calling President Obama’s latest jobs bill “good economics” because of the proposed payroll tax cut, tax credits, and infrastructure investments.
Some are claiming if passed the American [Anti-]Jobs Act will create up to 2 million new jobs and reduce the unemployment rate to 8%.
“Payroll tax cuts are very powerful,” said Allen Sinai, chief economist of Decision Economics. “They provide a boost to direct income and, in turn, spending, which is important to growth.”
Unfortunately, they’re wrong. President Obama is rapidly becoming known as the Job Killer in Chief.
One of the big problems with his plan is that the tax cuts are only temporary, through 2012. Only permanent tax cuts cause business to plan for the long run and hire workers.
A smarter idea would be one that Mitt Romney has proposed — permanently reducing the corporate income tax to 25% or less, to make US companies more competitive with other nations who have slashed their tax rates.
Another bad omen: Obama plans to “pay” for the $447 billion “jobs” bill primarily by raising taxes, specifically “closing corporate loopholes” and encouraging “the wealthiest Americans and biggest corporations to pay their fair share.”
Believe me, we wealthy Americans (I’m one of them) are paying more than our fair share in taxes. If anything, wealthy Americans are overtaxed. Why should the risk-taking entrepreneurs and creators of wealth pay an average 30%-50% to the government (federal and state) in income taxes? It’s shameful and counter-productive.
The President talked almost exclusively about increasing government spending, making the deficit worse.
But the biggest impediment to reducing unemployment is the never-ending unemployment insurance scheme. It’s already been extended for a full year, and now the President wants to extend unemployment insurance for another year. “If the millions of unemployed Americans stopped getting this insurance, and stopped using that money for basic necessities, it would be a devastating blow to this economy,” said Obama. “Democrats and Republicans in this chamber have supported unemployment insurance plenty of times in the past. And in this time of prolonged hardship, you should pass it again—right away.”
Obama seems to think that jobless benefits are somehow free. He doesn’t realize that they are paid for with taxes, or making the deficit worse.
Supply-side economists such as Harvard’s Robert Barro have shown with numerous studies that extending jobless benefits discourages workers from finding jobs until they run out. Only in the final weeks of jobless benefits do workers get serious about finding a job, and when they do, suddenly millions “miraculously” find work. Barro argues that the unemployment rate could be less than 7% if we ended jobless benefits now.
It all comes down to how much faith our government officials have in the market economy. The studies show that the millions of the unemployed do find jobs when their unemployment insurance runs out. But Obama and the Keynesian economists fear it might not happen. Free-market economists are much more optimistic and upbeat about how well the labor markets work unfettered by government controls.
Another big reason why unemployment is staying high — the real unemployment rate, if you count discouraged workers, is over 20% (see www.ShadowStats.com) — is because of bad laws recently adding a heavy burden to business. They include:
–ObamaCare, which forces businesses to pay for the 30-million uninsured.
–Excessively high minimum wage law (over $7), which has caused 30-50% unemployment rates among teenagers and minorities.
–Killer financial regulations due to Sarbanes-Oxley and Dodd-Frank legislation.
The stock market would be sharply higher today if he had recommended reversing these job-killer acts by government.
But there is hope: Last week the President overruled his EPA chief Lisa Jackson and scrapped her controversial plan to tightened smog rules on US plants. This decision came after a major Wall Street Journal editorial claimed that the EPA action would curtail industrial production by 8% or more in the US. The EPA is an out-of-control agency and ought to be abolished.