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September 12, 2011

Response to the Obama Jobs Plan

Last week, President Obama proposed spending $450 billion to create more jobs in the United States.

“Fairness”. President Obama hinted that businesses were to blame for the higher unemployment by stating, “These men and women grew up with faith in America, where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share.” He went on to add, “Where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits. For decades now, Americans have watched that compact erode. They have seen the decks too often stacked against them. The people of this country work hard to meet their responsibilities, the question now is will we work hard enough to make ours.”

Whose responsibility is it to be employed? Whose responsibility is it for the individual in the workforce to have the skills and talents necessary to be employable? The President also added that the government needed to restore “fairness.” Again, I must ask whose responsibility is it to make sure I am employed.

It’s the individuals.

The President noted that in the good ol’ days people “stepped up, did their jobs, and got rewarded.” Where was the government’s regulatory body then. Somehow, we are led to believe that this explosive growth in government can somehow correlate to a return to “fairness” when no such regulatory prowess existed when things were “fair.”

Infrastructure Spending. While increased spending in the country’s infrastructure may help fix roads, I’m doubtful as to its employment impact. As you can see in our Obama budget section, transportation spending jumped nearly 50% from $70 billion to over $100 billion in President Obama’s first year in office. Yet, unemployment in the construction specialty remained near 30% with over 2 million workers unemployed.

Spending did not seem to solve the employment problem before, therefore I’m suspicious the same spending habits will solve the problem again. Haven’t we heard “shovel ready” before?

$4,000 Tax Credit for Those Looking More Than Six Months For a Job. This incentivizes employers to hire longer term unemployed, however, it encourages them to also turn away from the newly unemployed, perhaps even if they are more qualified. Ultimately, this could lead to less incentives for the short term unemployed to seek work until they are more than six months unemployed. The bottom line is that this credit will make it more difficult for the newly unemployed to find work.

This line alone could lead to some short term problems for the economy. Imagine a newly unemployed person having a more difficult time finding work. Is the mortgage in trouble as a result? You bet. The long term unemployed have most likely participated in the foreclosure process. This line could possibly be the second most unfriendly policy towards the housing market during the Obama Administration (next to the foreclosure freeze). The Obama Administration would do better to simply offer this to employers who hire the unemployed.

Extending Unemployment Benefits for Another Year. Once again, like in the above scenario regarding the infrastructure spending, we’ve been here before, and it hasn’t worked. Instead of paying people to be unemployed, we should be incentivizing them to become small business owners. Common Sense Capitalism previously wrote an article on this topic.

Cutting payroll taxes. This will be helpful to the current workforces income and ultimately, spending. It should serve as a catalyst to some economic growth (on the presumption on increased consumption). Interestingly enough, it may assist some sole proprietorship into becoming a small business by hiring workers (via the increase in capital).

Financing. The President insisted last week that “everything in this bill will be paid for.” He stated that he would simply increase the $1.5 trillion mandate for the “Super Congress” by the amount the bill is worth. The problem here is that the Congress could only agree to cut 66% of that this past summer. How is this body going to cut twice as much over the next four months?

Until something forcibly occurs, this bill is additional spending no matter how it’s spun.

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