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Monday, August 22, 2011

Obama still doesn't get it

One of the proposals that President Obama is considering for his bally-hooed prospective speech on jobs in September is to extend the temporary payroll tax cut for another year. As the WSJ writes, extending a temporary tax cut is not what businessmen need to feel the confidence to hire employees for the long term. They need to have more certainty in what government will be doing regarding their businesses over the long haul. Having a temporary payroll tax cut doesn't do much if that employee is going to be around after the year is up.
The biggest problem with Mr. Obama's payroll tax cut is that it's temporary. Employers hire workers based on their business needs and the costs of each new employee. They aren't likely to add workers based on lower tax costs if they know those costs are going to rise in a year. That's especially true when employers also know that ObamaCare is going to raise their cost of hiring in 2013.

Mr. Obama's payroll break is also only an indirect hiring incentive because it goes to the worker, not the employer who does the hiring. The President's Keynesians see the tax cut mainly as one more stimulus to boost consumer spending, and thus economic demand. As the President recently explained, the idea is to "put $1,000 in the pockets of American workers."

In other words, the plan is supposed to operate like the one-time tax rebates that didn't work when President Bush signed them in 2001 and 2008. The rebate checks showed up as a temporary blip in consumer spending and GDP, but they did nothing to change incentives to work or invest and promote long-term growth.
So the President is basically going to go back to policies that haven't worked in the past in the hope that he'll score enough headlines to counter the image that his administration isn't doing anything to fight unemployment.

However, he'd do better to address the things that his administration does all the time to create uncertainty for businessmen. For example, the WSJ takes a look at stories from just last week about this administration's actions to indicate how Obama and his appointees are regularly creating the uncertainty and nervousness that prevent businesses from expanding and hiring more employees. Here is just a sample.
Tuesday: "Federal mortgage role to be preserved: Obama is working to develop new housing policy." A Washington Post story reported that Mr. Obama has directed a White House team to develop a housing plan that would keep the feds deeply involved in mortgage markets, with subsidies and loan guarantees, perhaps even preserving Fannie Mae and Freddie Mac.

This contradicts the Treasury's February white paper recommending a much smaller government role in housing without Fan and Fred. A Treasury official responded that the white paper is still guiding policy, but private investors who might want to get into housing finance know the Post story came from someone in authority and have another reason to stay on the sidelines....

Thursday: "Exxon, U.S. Government Duel Over Huge Oil Find." Exxon has made the biggest oil discoveries ever in the Gulf of Mexico at some one billion barrels, but the feds have taken the extraordinary action of denying the oil company what had long been routine oil lease extensions. So Exxon and a Norwegian firm are suing the feds to be able to drill on the leases, spending money on lawyers for permission to create jobs and increase domestic oil production....

Thursday: "Obama to push stimulus plan." The President signals more government fiscal action, to be unveiled after Labor Day. Ideas on the table: New spending on roads and a tax credit for companies that hire workers.

The thinking, say aides, is to pressure Republicans to pass these proposals or look indifferent to high unemployment. So even as he proposes to reduce deficits far into the future in ways that will depend on decisions by future Congresses, the President will fight to increase spending immediately. Americans may conclude they've heard this cognitive dissonance before.
Check out the editorial for what else Obama's administration was up to last week. And on Sunday, they rested.

The point is that this stuff goes on week after week and does so much to create the environment that makes businesses sit on their money rather than expanding.

Obama has no sense of how the steady increase of regulations on businesses causes the lack of job growth. That's why the number of jobs in the federal government keeps adding jobs for regulators. IBD gives us a visual image of how extraordinary the increase in federal regulations have been.
Regulatory agencies have seen their combined budgets grow a healthy 16% since 2008, topping $54 billion, according to the annual "Regulator's Budget," compiled by George Washington University and Washington University in St. Louis.

That's at a time when the overall economy grew a paltry 5%.

Meanwhile, employment at these agencies has climbed 13% since Obama took office to more than 281,000, while private-sector jobs shrank by 5.6%.
And all those regulations have an impact on employment, something that the Obama administration just doesn't seem to understand.
The Obama administration imposed 75 new major rules in its first 26 months, costing the private sector more than $40 billion, according to a Heritage Foundation study. "No other president has imposed as high a number or cost in a comparable time period," noted the study's author, James Gattuso.

The number of pages in the Federal Register — where all new rules must be published and which serves as proxy of regulatory activity — jumped 18% in 2010.

This July, regulators imposed a total of 379 new rules that will cost more than $9.5 billion, according to an analysis by Sen. John Barrasso, R-Wyo.

And much more is on the way. The Federal Register notes that more than 4,200 regulations are in the pipeline. That doesn't count impending clean air rules from the EPA, new derivative rules, or the FCC's net neutrality rule. Nor does that include recently announced fuel economy mandates or eventual ObamaCare and Dodd-Frank regulations.

But what's good for regulators isn't necessarily good for the private sector, as compliance burdens impose ever-increasing costs on businesses.
And all those Obamacare regulations haven't even been formulated, much less kicked in. That will be another huge drag on the economy.

In fact, here will be another clue as to whether Obama really cares about creating an environment in which businessmen have enough certainty in order to plan to expand. We'll see whether or not he appeals the 11th Circuit panel decision against the individual mandate to the full Circuit Court or whether he forgoes that possibility and lets the case proceed as soon as possible to the Supreme Court. It's assumed that the case will end up in the Supreme Court at some point. The only question is whether it's heard this year or next. Many analysts think that Obama would like the case pushed back beyond the election. The last thing he wants to risk is a high court blow to his signature issue.

However, it would be best for the country if the case proceeds to the Supremes as soon as possible. Businessmen need to know what the status will be for providing health care for their employees. States need to know what they'll be required to pay out in Medicaid and health care for their citizens. They don't want to spend millions in developing programs that might just be struck down later on. President Obama could do businessmen a big favor and send the case on to the Supreme Court to be decided sooner rather than later. We'll see how much concern he actually has for improving the jobs environment.


Bgreig said...

Thank you for bringing out these facts! I have been surprised that the press has not focused on the weight of increased regulations by the Administration. And look at the regulatory agendas of the federal agencies like the Dept of Labor for more examples.

I ask the President to announce a moratorium on implementation of any new regulations for the balance of his term.

ic said...

The smartest man in the world knows best.

Corollary: the stupidest will follow and vote for him again.