Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
The Jobs Act Is the Recovery ACT of 2009 Redux and If Possible Even Worse
The President’s proposed American Job Act will not stimulate the economy at all even though it proposes spending a huge amount of money, $447 billion, in the form of grants, tax credits, special funds, a government sponsored National Infrastructure Bank, and other costly new government programs.
The largest expenditure is the cut in the social security taxes paid by businesses from 6.2 percent to 3.1 percent on the “first $5 million in payroll”, grants a tax holiday (no payroll tax) for “added workers or increased wages” up to the first $50 million of wages and wage increases. This benefits businesses which are now paying the tax. Workers will have the payroll taxes reduced similarly to 3.1 percent. But these are “conditional” tax benefits. The government will deposit into the Social Security Trust Fund the revenues lost by the reduction of the payroll taxes, paying for it out of the general budget so it will have to be paid by taxpayers in general or borrowed to be paid by future taxpayers. Where is the net benefit? It looks like an attempt to buy votes by making a one-time gift to businesses and workers in an election year. Because it is a one-time gift, it will not encourage new investment or even additional consumption or the hiring of new workers at all. It does not benefit the unemployed or even encourage hiring new workers because it is a one-time deal. Businesses and households base their decisions to invest and consume on “permanent” expected income. Moreover, nothing else in the jobs act actually raises the prospect of sustainable future demand. The only jobs created will be the increased bureaucracy required to administer the Act.
Like the Recovery Act of 2009, a waste of $800 billion, it proposes to make grants to local governments to pay for 280,000 teachers, cops, and firefighters. It will pay to modernize “at least 35,000 public schools” (a state and local government responsibility), supporting new science labs, no doubt designed to teach the “science” of man-make global warming, provide internet-ready classrooms fitted with imported computers, no doubt, Presumably most will go to “blue” states which are generally unable to get their state budgets under control.
The Act will give tax credits ranging from $5,600 to $9,600 to encourage the hiring of unemployed veterans. Wouldn’t it be less expensive to hire them to replace government workers? And let businessmen hire the best applicants, including veterans.
It proposes to create a National Infrastructure Bank to finance modernizing roads and bridges, new and improved rail facilities, new airports, and waterways. What happened to motor fuel taxes that were supposed to pay for highways and bridges? Almost all of our rail system was built with private funds because they were expected to be profitable! If a project is worth undertaking, it will be financed by banks, investment houses, and Wall Street. Who needs a socialist bank which, like all socialist mistakes, endures forever
It proposes to finance the rehabilitation of “homes, business and communities” by “leveraging private capital and scaling land banks and other public-private collaborations.” Public-private sounds like it came right from Hitler’s sponsorship of the “people’s car” or Obama’s new union-dominated General Motors.
The Act promises the “most innovative reform to the unemployment insurance program in 40 years”. It proposes “innovative work-based reforms to prevent layoffs and better use of Unemployment Insurance funds, by “work-sharing”, improving state programs to create temporary jobs, or “pursue on- the-job training, and re-employ older workers”, and help “unemployed workers to start their own businesses.” This is the real “pie-in-the-sky when you die”, Woody!
The Act also proposes a $4,000 tax credit to employers for hiring long-term unemployed workers. Surely, Mr. President, you can think up something for short-term unemployed workers. How long does one have to be unemployed to be a long-term unemployed worker? When his unemployment insurance runs out?
The Act also has “teeth. It proposes to “prohibit employers from discriminating (?) against unemployed workers when hiring. If the employer is hiring, is he not hiring an unemployed worker? Thinking up ideas like this is made to order for the President’s czars.
It proposes to create a fund “for subsidized employment, training programs, and summer/year round jobs for youth.” Another fund to be administrated by one of your czars, Mr. President.
Jack Lew, the director of the White House Office of Management and Budget, said the bulk of the plan –- $400 billion over 10 years — would be raised by limiting the itemized deductions, such as those for charitable contributions and other expenditures, that may be taken by individuals making more than $200,000 a year and families making over $250,000 a year. The rest would come from provisions affecting oil and gas companies, hedge funds, and the owners of corporate jets. The New York Times reported that Mr. Lew said that the Congressional panel charged with finding at least $1.2 trillion in savings this fall as part of the agreement to raise the debt ceiling will have the option of accepting the payment proposals submitted by Mr. Obama, or proposing new ones of their own. So we have a jobs bill that will spend $447 billion in the first year or two but will be paid for out of revenues over the next decade. Pay-as-you-go? Who’s kidding?
Me. Lew did not mention the highly subsidized wind and solar plants, whose subsidies make the oil industry’s depletion allowances look like peanuts and ought to be ended. And the oil industry pays huge amounts of taxes. The same cannot be said for Pres. Obama’s wind and solar plants; they pay no taxes. To make matters worse, Uncle Sam is left holding the bag for billions in guaranteed loans they received and they pay no taxes because one of the subsidies they receive are tax credits. In the event of their failure, the loans they have incurred will have to be paid by Uncle Sucker.
And there are other goodies. The Act provides allowing mortgage debtors “to refinance their mortgages at today’s near 4 percent interest rates.” How many jobs would that create?
At least we now know what all those Czars have been doing. There is not a free market supporter in the administration. Mr. Sperling, Pres. Obama’s chief economic adviser, is a lawyer. It figures.
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