Newt Does a Job on Obama on Jobs
- 0 Comments
President Barack Obama exulted that the November unemployment
report “was the best since 2007.” The report showed double-digit
unemployment and still further job losses. Apparently, President
Obama considers that a major achievement. Rest assured the
American people will not.
The army of the unemployed now totals 15.4 million
Americans. Another 9.2 million were working part-time “because
their hours had been cut back or because they were unable to find
a full-time job,” according to the Bureau of Labor Statistics.
Another 2.3 million “wanted and were available for work.” That
totals almost 27 million unemployed or underemployed, which would
amount to a total effective unemployment rate of 17.5%.
Unemployment among African-Americans is at Depression-era
levels at 15.6%. Unemployment among teenagers is at 26.7% because
of reckless increases in the minimum wage. The number of
long-term unemployed (out of work for more than half a year)
smashed records, rising by almost 300,000 to nearly 6
million.
President Obama’s Chairman of the Council of Economic
Advisors, Christina Romer, displayed just how out of touch the
Administration is with this real world in the Wall Street
Journal on December 2. She claimed credit for
the President’s economic policies in stopping “the economic free
fall and stabilizing financial markets” and for “restoring
confidence and begin[ning] the process of financial market
repair.” “Restoring confidence” is not what comes to mind when
evaluating the impact of the President’s policies of
record-shattering deficits, explosive government spending, and
unprecedented federal debt.
Yet, the President continued high in orbit completely out
of touch in his redundant jobs speech yesterday, where he said to
reduce the deficit we need to spend more money. Go look it up.
But don’t be surprised. That is his Keynesian economic policy,
where the more the government spends the richer we get.
But the President was both for and against deficits
yesterday, blaming Republicans for the federal deficit. His
wasted and failed $787 billion stimulus supposedly had little to
do with the record shattering $1.4 trillion 2009 federal deficit.
Apparently neither did the additional $400 billion in the Omnibus
spending bill passed right after the stimulus, and the one-third
increase in federal welfare spending, from $522 billion to nearly
$700 billion, that he and Congressional Democrats have already
adopted.
Back on earth, the numbers show that the deficit for Bush’s
last year in office was $458.6 billion, only a third of Obama’s
2009 deficit. And the deficit for the last budget adopted by the
Republicans when they held Congressional majorities was $160.7
billion, only about 10% of this year’s Obama/Congressional
Democrat deficit. President Obama is now trying to claim success
in generating recovery with his $1.4 trillion Keynesian deficit,
at the same time he is blaming George Bush and the Republicans
for that same deficit. If President Obama did not want a $1.4
trillion deficit, he should have adopted policies to change it
when he came into office. Instead, he embraced it as part of his
Keynesian economic policy, and as a result it is his deficit, not
George Bush’s.
Romer, in fact, tries to claim success for the Keynesian
deficit and stimulus in her Wall Street Journal
article, saying the stimulus “increased employment between
600,000 and 1.6 million.” But the ugly reality is that since
January the number employed has declined by
3.6 million, while the unemployed have increased by 3.76 million.
The claim that the stimulus increased employment is a complete
fairy tale produced by a model that assumed the result. The model
used by CBO started by assuming that
government spending increases GDP by a multiplier of 1.5 times
each dollar spent, as claimed by the Administration. With that
assumption, it is a pure mathematical calculation to conclude
that the stimulus increased employment as claimed.
But economic growth, jobs, and prosperity are not produced
by runaway government spending, record shattering deficits,
higher welfare benefits, and exploding federal debt, as assumed
in the outdated, retro, Keynesian thinking of the untutored
extremists now running Washington. That is why the true number
for jobs created and saved by the stimulus is exactly
zero.
The Failure of Obamanomics
The economy will move into recovery now into next year, and
the recession will be declared to have officially ended some time
this fall. Expect a symphony of loud celebrations and
congratulations for the Anointed One from what Rush Limbaugh is
aptly calling these days “the state-controlled media,” as
President Obama claims personal credit for any positive wiggle in
the economy. But that recovery will have nothing to do with the
utterly failed Obamanomics for the two reasons explained
below.
First, the recovery is long overdue. The recession is
officially scored by the National Bureau of Economic Research as
starting in December, 2007. From the beginning, Washington tried
to counter the recession with old-fashioned Keynesian economics,
rather than the more modern, wildly successful, supply-side
economics. In February 2008, President Bush joined with Speaker
Pelosi to push an entirely Keynesian stimulus package through
Congress, based on tax rebates, which are
economically equivalent to welfare checks, rather than tax
rate cuts, which provide supply-side
incentives for growth. Senator Barack Obama at the time strongly
supported that “stimulus,” which we can see now in retrospect had
no positive impact on the economy.
So President Obama, who experience proves does not learn
from experience, pushed through another Keynesian “stimulus” bill
in February 2009, only wasting 5 times as much money. Still the
recession continued, immune to the Keynesian stimulus, and
unemployment soared into double digits, even though President
Obama promised his stimulus would keep unemployment below 8%.
President Obama yesterday claimed again that one-third of his
stimulus was “tax cuts.” But those tax cuts were again all tax
credits, rather than rate cuts, and so were just more Keynesian
spending.
The average recession since World War II, which is 65 years
ago by now, has been 10 months. The longest previously was 16
months. We have now suffered through almost 24 months since this
recession started. The recession may ultimately be officially
scored as ending a couple of months ago. But it will still be the
longest recession since World War II by far. Keynesian
Obamanomics has already failed to end the recession in a timely
manner.
Indeed, the recovery is both too little and too late.
Historically, the deeper the recession the stronger the recovery.
Based on the severity of this recession, real growth over the
next year should be 6% to 8%. Indeed, the major tax increases
slated to go into effect in 2011 should cause even more rapid
growth over the next year, as income is moved forward as much as
possible to avoid the later tax increases. That is the yardstick
by which to measure this recovery. So far, it appears to be
running well below that.
The second reason why the recovery has nothing to do with
Obamanomics is that the economy naturally recovers on its own. We
don’t even remember the business cycle anymore, because
Reaganomics was so successful in eliminating it, with 25 years of
almost uninterrupted economic growth. But the term business
cycle, means the economy naturally goes up
as well as down. Every morning people get up and try to figure
out how to make their business prosper again, or find a new job.
Over time, this process will naturally lead to recovery. That is
why the average recession since World War II has ended in 10
months. Barack Obama’s Keynesian economics has nothing to do with
it. The economy was always naturally going to recover on its own,
and should have long before now, if Obama’s neo-socialism hadn’t
gotten in the way.
Conservatives should not try to deny the recovery is
happening, or predict continued recession. They should explain
why the Obama/Democrat policies have made things worse rather
than better, through the record, backbreaking debt, collapsing
dollar, rising energy prices, and more. They should explain why
we can do better, with free market economic policies. In the
1960s, when the liberals were in power exactly like they are
today, the economy was booming (thanks to President Kennedy’s
supply-side tax rate cuts). But the Democrats were still
massacred in the 1966 Congressional elections, and the
Republicans still won the White House in 1968, holding the
presidency for 20 of the next 24 years. The liberal media was
also much more dominant then than it is now.
Gingrich v. Obama
President Obama’s so-called Jobs Summit last week was a
political charade meant to provide a public relations foundation
for a third stimulus package involving
still more of the same, brain-dead, Keynesian snake oil. He
wasn’t interested in listening to anything from anybody at the
Summit. He already knew what he was going to propose in the
package he unveiled yesterday. Those attending the Summit were
just props.
For that third stimulus package, President Obama proposed
paying people to “weatherize” homes (cash for caulkers), which,
again, will not create any new jobs on net. It will just
reallocate jobs from the work that would have been done with
those funds in the private sector. That will probably result in a
net loss of national income, because the private market allocates
resources and workers to the most productive and urgent uses.
Extending unemployment benefits further, as Obama proposed yet
again, just perpetuates unemployment. The infrastructure spending
Obama proposed was supposed to be in the last stimulus. Spending
still more funds that should go back to taxpayers or to reducing
the deficit on that is again not going to increase overall jobs
on net.
President Obama proposed federal loans for small business.
But the disastrous experience with Fannie Mae and Freddie Mac
shows that the government should stay out of the loan business
and political allocation of credit. Credit will flow through
established markets if the federal government, including the
Federal Reserve, adopts strong pro-growth, sound money policies.
Obama also wants a tax credit for businesses hiring workers. But
true to his practice of recycling old ideas that are proven
failures, the federal government for many years maintained a
Targeted Jobs Tax Credit that did the same thing. It was
abolished based on studies showing that it only paid companies to
hire workers they were going to hire anyway. Other narrow,
cramped tax breaks Obama proposed will not promote general
economic recovery.
In sharp contrast, former House Speaker Newt Gingrich held
his own job summits last week, in Cincinnati, Ohio, and Jackson,
Mississippi. Based on what he has heard from small business
leaders there and across America, Gingrich has proposed his own
jobs plan. While Gingrich was Speaker of the House, federal
spending growth was at its lowest level since the 1920s. Gingrich
says, “We can apply the same principles that worked then to
create jobs and four straight balanced budgets through smaller
government, less spending, lower interest rates, and less
debt.”
The Gingrich Plan provides immediate payroll tax relief by
cutting the payroll tax rate by 50% for two years, giving a raise
to workers and incentives to small business to create
jobs.
Secondly, rather than increase capital gains tax rates by
66% as Obama and the Democrats propose, Gingrich would abolish
capital gains taxes altogether, as they just involve double
taxation of capital income. That is why this policy has been
adopted in 14 out of 30 OECD countries, plus China, Taiwan, Hong
Kong, Singapore, and others.
Thirdly, America suffers from the second highest business
tax rate in the industrialized world, with a federal rate of 35%
and states pushing it close to 40%. By contrast, the average
corporate tax rate in the European Union has been slashed from
38% in 1996 to 24% today. Ireland has a corporate tax rate of
12.5%, which has led per capita income to soar from the second
lowest in the EU 20 years ago to the second highest today. Our
own Treasury Department has said Ireland raises more corporate
tax revenue as a percent of GDP than we do with our much higher
rates. Corporate tax rates in India and China, our emerging
competitors for the future, are lower as well. Gingrich would
reduce the federal business tax rate to Ireland’s 12.5%.
Gingrich says quite rightly, “Combined with the zero
capital gains rate, America would become the most desirable
country in the world in which to invest and start a business.
This means new jobs and new prosperity.”
Instead of reinstating the death tax with a 45% rate, as
Obama and the Democrats want, Gingrich would abolish the death
tax as well. Gingrich says, “Inheritance is the most powerful
accumulator of capital. Studies show that eliminating the death
tax would create hundreds of thousands of new jobs.” Taxpayers
have already paid considerable taxes on any money saved over a
lifetime. Taxing it again at death is just abusive, unfair, and
arbitrary. Gingrich would also provide for immediate expensing
for 100% of new equipment purchases by small businesses,
stimulating investment in new, productive technologies.
Exactly the opposite of the regressive Cap and Trade
policies of Obama and the Democrats, Gingrich would implement an
American Energy Plan that would unleash the private sector to
produce low cost, reliable energy supplies from domestic,
American, energy sources. This energy development would create
millions of new jobs, and generate billions in new revenues for
federal and state governments.
Gingrich also favors the same strong dollar monetary
policies as Reagan, guaranteeing the dollar remains the world’s
reserve currency, and ensuring lower interest rates over the long
run and more capital investment. He would also balance the
federal budget within 7 years by controlling spending and
reforming government, as he did with the Republican Congress in
the 1990s. He would also abolish TARP and return the money, end
all bailouts, and repeal still unspent “stimulus” funding.
Gingrich also favors following the 50% payroll tax cut with
a permanent personal account option for that portion of payroll
taxes for younger workers, with the personal accounts
substituting for an equivalent portion of future retirement
benefits. Given historical capital market returns, workers should
get much higher benefits as a result than Social Security even
promises today, let alone what it can pay, with a continuing
safety net guaranteeing that workers would get at least as much
as Social Security currently promises them. This would provide a
continuing gusher of new savings for capital investment,
resulting in more jobs and higher wages.
These policies would reduce unemployment back to 3-4%, and
restore long-term economic growth, maybe even another 25-year
boom. The American people recognize the common sense behind this
Jobs Plan, and would overwhelmingly support it over President
Obama’s neo-socialism. Just think who you would want debating
President Obama on the platform in 2012.
