After 961 days in office, President Obama’s jobs plan was finally unveiled to the public. President Obama first hinted that he had such a plan in early August, but he decided to wait on releasing it until after he was done with his $50,000 per week Martha’s Vineyard vacation. There was really nothing surprising about the $447 billion American Jobs Act, which is just a regurgitation of past policies. Some specifics include an extension of the payroll tax holiday on employees and employers, an extension of unemployment insurance benefits and $50 billion to modernize our roads. Some of the provisions in the bill, such as the payroll tax holiday, have merit, but it is still gimmicky. The tax holiday only lasts a year, so it will not have that large of an impact on hiring, since businesses often look three to five years in advance when making hiring decisions.
Other provisions of the bill, such as the extension of unemployment benefits and $50 billion in infrastructure spending, are a farce. Unemployment benefits already last for ninety-nine weeks, which is almost two years. How much more can we extend this program without risking people becoming permanently reliant on the government? As for the $50 billion in infrastructure, I thought we already allocated $787 billion for shovel-ready jobs in the American Recovery and Reinvestment Act in 2009. Remember, this was the bill that would lead to the unemployment rate going over 8 percent if not passed. Here we are almost two years later and the unemployment rate is 9.1 percent.
The American Jobs Act is nothing more than an attempt by the administration to show the American public that they are doing something to try and get people back to work. An interesting development has occurred in the past few days on how the administration plans to pay for the jobs bill. It seems that the administration is going to rely on the tried and true liberal playbook of asking the rich to pay their fair share. On Monday, September 12, the administration announced that they plan on paying for the bill by raising taxes on private equity managers and oil companies. You know, those evil people who are responsible for creating thousands of jobs. The administration also plans on limiting the deductions on families making $250,000 a year. I never knew that making $250,000 a year qualified someone as a millionaire and billionaire. I guess I better change my mathematical economics major, since it seems that I cannot do simple arithmetic.
Also, Obama is floating around the idea of a “Buffett Rule” that acts as a surtax on people with incomes over $1 million. All of this is wrongheaded. First of all, an individual making $250,000 a year is, at best, upper middle class, and is not even close to being in the same league as Warren Buffett, who has a net worth north of $50 billion. Mr. Buffett feels guilty since he claims that he pays a lower income tax rate than his secretary, mostly due to the fact that most of his income comes from capital gains. Many conservatives, such as Senate Minority Leader Mitch McConnell, among others, have rightly pointed out that if Mr. Buffett does indeed feel so guilty, then he should cut a check to the IRS tomorrow. No one is stopping him from doing this. Also, what is getting lost in this debate over taxing the rich is the fact that these millionaires and billionaires are the ones who create jobs. I don’t know about you, but a poor person has never given me a job. If the administration was serious about jump starting this economy, then they would embrace a plan of cutting tax rates across the board while broadening the tax base, as many of the GOP presidential candidates have done.
Unfortunately, this means that the 47 to 50 percent of Americans who currently do not pay a dime in federal income taxes will have to start contributing. This strategy is not a new one. It is similar to one enacted by President Ronald Reagan, a president who inherited an economy that was struggling just as much as the one President Obama inherited, in 1981 and 1986. Instead of trying stimulus spending, Reagan went with the tax cutting approach and, guess what, it worked. GDP grew at an annualized rate of 3.85 percent during the Reagan years, as opposed to the anemic 0.4 percent and 0.8 percent GDP growth of the last two quarters. If Barack Obama is serious about reigniting the American economy, then he should focus on creating the conditions that allow for more Warren Buffetts and less welfare recipients.
Contact Kyle Gavin at [email protected]