Sunday, September 18, 2011

The King's Speech

It’s déjà vu all over again.

President Obama recently gave his umpteenth speech about the bleak situation we have with jobs and the economy and what needs to be done to make things better. That’ll solve our economic problems – another speech.

The next day, the stock market dropped three hundred points.

Obama proposed his latest and greatest plan to fix the economy, and it was for more of the same: massive government spending, throwing money at his favored groups, demonizing “the rich”, repairing the infrastructure, touting “green jobs” as the savior of the economy, demanding that Congress pass his proposal immediately, blah, blah, blah.

You may have detected that I am more than a little skeptical, which I am, because we have been down this road before with Obama. I’m sure you all remember the last stimulus, in 2009. It was twice as big as this one; we were told at the time that it would revive the economy and keep unemployment under eight percent. We were also told back then that that stimulus, like this one, had to be passed immediately in order to avoid financial calamity. Now, two years later, unemployment is stuck at over nine percent, the economy has flat lined, the housing market is non-existent, and there is almost no good economic news. Everything that Obama and crew told us the last stimulus would prevent has happened! So why would anybody still listen to these people when it comes to the economy and jobs? They are obviously clueless.

I actually read in the paper after Obama’s speech that an economist at Moody’s Analytics said this latest stimulus plan would reduce the unemployment rate to, you guessed it, eight percent!!

Of late, Obama has developed a new concern for the federal budget deficit, or at least he wants us to think so. In his speech, he said that the new spending called for in his current plan will not increase the deficit because everything in his bill will be “paid for”. He didn’t tell us how it would be paid for, though; he promised to do that later.

You can’t make this stuff up.

No matter which way one looks at Obama’s new plan, you find absurdities. Let’s start on a broad, overall scale and then work our way down to some of the specifics.

OK, from the 30,000 foot level, as they say, let’s look at this plan. It’s another government stimulus, much like the last one, only this one is smaller by half. It’s about half as big as the 2009 stimulus, and that one, by any objective measure, was a total failure. Here’s the absurdity: If a big stimulus has already failed, why will a smaller one now work? The only logical argument one could make is that the last stimulus failed because it wasn’t big enough, so now we need a larger one. But a smaller one --- ? Absurd.

Let’s go on to some of the specifics of the new plan.

It calls for government spending to keep teachers, firemen, and police on the job. But why do we only want to keep these groups employed? With the jobs picture being as bleak as it is, we need to do something to increase job creation across the board; we need to get everyone back to work. We need to create economic conditions such that all companies, large and small, in every industry, in every location, will be able to expand and start hiring. It makes no economic sense whatsoever to restrict job creation efforts to just some segments of the work force.

Now let’s look at the proposed tax breaks in Obama’s plan for companies that hire or increase wages.

I worked in the corporate world for over thirty years as an engineer and manager at various levels up to vice president. During that time, I must have hired literally hundreds of people. Never, not once, did I or anyone I knew or observed ever hire somebody because of a tax break, nor would we have. That’s not why businesses and companies hire.

Hiring is a serious matter to companies. It involves taking on a significant new expense that will be there far into the future. Note: I’m not talking about temporary or seasonal help here. Companies are looking out into the future, not just the short term. They don’t like to have to lay people off, so they only hire when they are convinced that they can afford it in the long term and that the additional sales will be there to pay for it. Hiring is a business decision, not a public service matter.

People are hired because the company has more work than it can handle, or because the company is confident that additional business is coming, or because they see a new business opportunity, or they want to do a better job of servicing customers. Those are the reasons that companies hire, certainly not because of some one time tax break or other such gimmick.

People who think that such short term tweaking of tax provisions here and there will stimulate broad scale hiring and reduce unemployment in the long term have absolutely no knowledge of how the business world operates. In the real world, that kind of an approach is pure nonsense.

Then there is the part of Obama’s new plan about giving a tax break to companies that increase workers’ wages. This is so idiotic it defies belief. How could increasing wages possibly spur hiring? If anything, such an action would have the opposite effect, since the more a company pays existing employees, the less money it has to hire new ones. Furthermore, the tax break is a, again, one-time thing, but the increased wages are permanent, so no business will pay the slightest attention to this provision of Obama’s new plan.

Obama wants to, once again, extend unemployment benefits. Regardless of the merits of this proposal on humanitarian grounds, as far as job creation is concerned, it’s another absurdity. Paying people not to work for an even longer period of time will obviously not get them a job. Our goal in this area shouldn’t be to keep people on the unemployment roles for a long time; or goal should be to get them off of unemployment because they have gone back to work. The unemployed don’t need another government handout; they need a job. Extending unemployment benefits will not get them onto somebody’s payroll; if anything, it might discourage them from looking hard.

I have a suggestion for President Obama: If you want to stimulate the economy and job creation across the board, stop doing those things that stymie that. Mr. Obama, you’re part of the problem, and if you truly care about job creation, here are some things you could stop doing.

First, stop demonizing “the rich”. We continually hear you talking about how the rich don’t pay their fair share, that they are greedy, that they got where they are because they won life’s lottery rather than due to their own hard work, etc. Why would anybody, such as a sole proprietor or a small business, who can afford to hire someone actually do it when they feel they are being targeted by the government? So just stop it, Mr. Obama.

Next Mr. Obama, stop punishing companies that you regard as unworthy or that your political cronies don’t like.
Your National Labor Relations Board recently sued Boeing for moving a factory from a unionized state to a right-to-work state, which was displeasing to your union buddies.

Gibson Guitar was raided by the government because of some obscure law about wood that they import from India.
Coal users and producers have been on your hit list for years. You famously stated that you want to bankrupt the coal industry, because you think they are polluters. Your EPA recently issued new emission standards for coal-fired power plants, which will result in the closing of plants and the loss of jobs.

You apparently don’t like oil drillers, either, as you have stopped any new offshore oil exploration or drilling, loosing potentially tens of thousands of high paying jobs.

Mr. Obama, if you really care about jobs, just stop this jihad against companies and businesses.

Once you have stopped you job-killing behavior, Mr. Obama, here are two positive actions and one attitude adjustment you could undertake. These alone would have a game-changing effect on the U.S. economy and job creation.

Number 1. The U.S. has the highest corporate income tax rate in the world – 35%. Cut it. You could follow the example of Canada, and use their 16% rate. With this one action, you’d see so much increased business activity and the hiring that goes along with it that your head would swim.

Next, take a machete to onerous government regulations on business. A good start would be to cut the EPA staff by, say, half, and then go from there on a rampage through other government regulators. Companies would save millions, which they would be more than glad to use on business development. This, too, would promote economic expansion and job creation in a significant fashion.

Finally, Mr. Obama, have an epiphany. Start looking at companies and businesses of all sizes as the drivers of our economic prosperity that they are. Come to realize that the private economy, not government, creates wealth. Celebrate our free enterprise system and the magnificent benefits we all receive from it.

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