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Obama’s plan: raise taxes and borrow $447 billion for more stimulus spending

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Obama wants to stay the course: more stimulus spending
The Democrats took over the House and Senate in January 2007 - and it all went downhill from there

From the liberal Globe and Mail: IT’S JUST ANOTHER STIMULUS BILL.

Excerpt:

Barack Obama is seeking legislative backing for economic stimulus worth $450-billion (U.S.), making the U.S. President a lonely advocate for spending at a moment dominated by calls for austerity.

Mr. Obama told a joint session of Congress Thursday evening that the United States must get a grip on its rising debt, but not at the expense of condemning millions of people to the unemployment rolls and welfare because traumatized companies refuse to hire.

[…]The President’s proposals Thursday were the same as those telegraphed in the U.S. media over the previous 48 hours. He’s responding to an economy that is quickly losing momentum, expanding at an annual rate of only 0.7 per cent in the first half of the year. The unemployment rate is 9.1 per cent, compared with 8.8 per cent in March, and 14 million Americans are unemployed more than two years into the recovery.

[…]Like the roughly $800-billion stimulus program Mr. Obama shepherded through Congress in early 2009, his new proposal would ease the tax burden on the middle class; send money to states, which have cut almost 500,000 jobs since 2010; and seek to create jobs for millions of unemployed construction workers by plowing millions into refurbishing roads and schools.

[…]The U.S.’s publicly held debt is on track to reach 82 per cent of gross domestic product by the end of the decade, higher than in any year since 1948, according to the Congressional Budget Office.

[…]The U.S. economy is faltering in part because previous stimulus programs are dwindling, while private demand has yet to return in robust way.

[…]Mr. Obama also proposes direct transfers worth $140-billion. Some $35-billion will go to states to help them retain teachers, police officers and fire fighters, while $30-billion would be used to refurbish schools, an initiative the White House likes because the work involved tends to be labour intensive and the contracts can be signed quickly.

I found this amusing summary of the jobs speech on National Review.

Spend $450 billion dollars now, it will create jobs, and I’ll tell you how I’m going to pay for it a week from Monday. If you disagree, you want to expose kids to mercury.

That about sums up the Obama years.

Yes, that about sums it up. Obama says: Let me spend your money on turtle tunnels, or you will be blamed and insulted for being “greedy”.

Fact-checking Obama’s speech

The very liberal AP fact-checks Obama’s speech here. (H/T Doug Ross)

Excerpt:

A look at some of Obama’s claims and how they compare with the facts:

OBAMA: “Everything in this bill will be paid for. Everything.”

THE FACTS: Obama did not spell out exactly how he would pay for the measures contained in his nearly $450 billion American Jobs Act but said he would send his proposed specifics in a week to the new congressional supercommittee charged with finding budget savings. White House aides suggested that new deficit spending in the near-term to try to promote job creation would be paid for in the future – the “out years,” in legislative jargon – but they did not specify what would be cut or what revenues they would use.

Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today’s Congress cannot bind a later one for future spending. A future Congress could simply reverse it.

Currently, roughly all federal taxes and other revenues are consumed in spending on various federal benefit programs, including Social Security, Medicare, Medicaid, veterans’ benefits, food stamps, farm subsidies and other social-assistance programs and payments on the national debt. Pretty much everything else is done on credit with borrowed money.

So there is no guarantee that programs that clearly will increase annual deficits in the near term will be paid for in the long term.

—OBAMA: “It will not add to the deficit.”

THE FACTS: It’s hard to see how the program would not raise the deficit over the next year or two because most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery. Deficits are calculated for individual years. The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion. Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.

Let’s now look at some of the specific proposals.

But will it work?

Hans Bader explains the plan in this excellent post at the Competitive Enterprise Institute. (He has lots of links, so I removed them, but you can find them in his post on the CEI web site)

Excerpt:

It contains more money for the long-term unemployed, more infrastructure spending, and funds for hiring laid-off teachers. It also would extend a cut in the portion of payroll taxes paid by employees. The measures would be financed mostly by deficit spending, but partly by raising taxes on the so-called “rich” — a category that includes most of the small business owners who actually hire people — and by eliminating what the administration refers to as “tax loopholes” — which are not really tax loopholes at all, but rather provisions that allow industries disfavored by the administration to benefit from the same tax code provisions as other industries.

[…]Even the least-bad of Obama’s proposals will not grow the economy. Aid for the long-term unemployed will reduce the size of the economy by encouraging some people to not accept jobs that pay far less than they were accustomed to, even when those are the only jobs available to them. Obama’s proposed infrastructure spending will not grow the economy either, as Veronique de Rugy and others note, since it will be accompanied by costly Davis-Bacon mandates designed to favor unions (which raise the cost of transportation projects and exclude many small non-union contractors), and some of it will be wasted on rail boondoggles and pork rather than roads and bridges, or on Obama Administration pet projects, like energy efficiency, that require specialized skills that most unemployed construction workers lack. (Ironically, Obama removed most transportation spending from the original $800 billion stimulus package for political reasons, replacing it with more harmful welfare and social spending.)

How about Obama’s previous stimulus plan?

Meanwhile, by sucking money out of the private-sector economy, the stimulus wiped out a million private-sector jobs, even as other stimulus provisions outsourced American energy jobs to foreign countries, and wiped out jobs in America’s export sector, resulting in a net loss to the economy of 550,000 jobs, according to two economists. The Obama administration’s use of taxpayer money to subsidize above-market wages for government employees is at odds with what economists like Lord Keynes (the father of the Keynesian school of economics) counseled in past recessions, and what Franklin Roosevelt did in the Great Depression, when he hired people to do construction and transportation projects in the WPA but paid them only very modest wages, providing opportunities to the unemployed without siphoning off useful talent from private-sector businesses.

But isn’t it a good idea to help the unemployed and public school teachers?

As the Heritage Foundation notes, “The consequences of extended unemployment benefits are some of the most conclusively established results in labor economic research. Extending either the amount or the duration of UI benefits increases the length of time that workers remain unemployed. UI benefits subsidize unemployment. They reduce the incentive unemployed workers have to search for new work and to make difficult choices–such as moving or switching industries–to begin a new job.”

The President’s proposed subsidies for laid-off teachers discriminate in favor of one occupation, without any legitimate reason for doing so: the unemployment rate among teachers is vastly lower than for many occupations, and lower than for most.  It is best understood as the Administration pandering to the teachers’ unions.

This man only has one thing in his mind and it’s spending your children’s money and giving speeches about how great that makes him. He likes to hear the crowds applaud him for spending your children’s money. I do not think well of people who, in tough economic times, come into my house, take my credit card, and spend a bunch of my money on public sector union workers who have job security, benefits and pensions that I can only dream about. Where does he think that the money he is spending comes from in the first place?

Unemployment Rate (Not seasonally adusted)
Unemployment Rate (Not seasonally adjusted)

We need an exit strategy from this Keynesian deficit spending quagmire. This man has spent over a trillion dollars on the job-killing Obamacare program, and over a trillion more on stimulus spending. He is running 1.65 trillion dollar annual deficits and he wants to spend even more. And what have we got to show for it? The worst economic recovery in the history of the country – after a recession caused by his own party – and an unemployment rate that is more than double what Bush’s unemployment rate was when he had a Republican House and Senate in 2006.

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Everything you need to know about Paul Krugman and the New York Times

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Government Spending Vs Jobs
Nancy Pelosi and Harry Reid took control in 2007

From Newsbusters.

Excerpt:

Exactly what country does New York Times columnist Paul Krugman actually reside in?

Before you answer, consider the following sentence from his article Monday:

Although you’d never know it listening to the ranters, the past year has actually been a pretty good test of the theory that slashing government spending actually creates jobs.

For the past year to be a good test of this theory, there would have needed to be a slash to government spending, right?

Was this the case?

Hardly.

In fiscal 2010, total federal outlays were $3.72 trillion. In fiscal 2011 which ends September 30, we’re projected to spend $3.83 trillion. That’s a $111 billion increase.

Yet this Nobel laureate in economics thinks government spending was slashed.

In reality, since the last time such outlays declined year over year was 1965, we should really be testing Krugman, Obama, and the Democrats’ theory that dramatic increases in government spending creates jobs.

Democrats have been radically increasing outlays since they took over Congress in 2007. During this time, as spending rose by 41 percent, the economy lost roughly seven million jobs sending unemployment skyrocketing from 4.4 percent to 9.1 percent.

If Krugman wasn’t delusional, the above referenced sentence from his Monday column would read, “Although you’d never know it listening to the ranters like Barack Obama, the Democrats, Robert Reich, and me, the past four years have actually been a fabulous test of the theory that exploding government spending actually creates jobs.

Isn’t that really the only conclusion that one could draw given what’s happened since this recent Keynesian experiment began in 2007?

Of course, it’s unfair to expect this Nobel laureate in economics to make such an obvious determination.

He thinks a $111 billion increase in spending is a slash.

I think that Paul Krugman is going beyond mere mendacity these days, as his Keynesian worldview is disproved right before his eyes. The whole country is being treated to a massive disproof of all of his ideas, and this must be causing him some mental strain.

Is Paul Krugman seen as reliable?

I’m not the only one to point out how nutty Krugman has become of late.

Here’s a bunch of non-conservatives:

Why does the New York Times hire a deluded person? Because they don’t so much report the news as they provide their readers with “confirmation” of a worldview that allows them to feel that they are right without having to care about reality. In short, Krugman is a well-paid writer of fiction.

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Employers added ZERO net jobs in August

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Story from Bloomberg News.

Excerpt:

Employment in the U.S. unexpectedly stagnated in August and the jobless rate held at 9.1 percent as American employers became less confident in the strength of the recovery.

Payrolls were unchanged last month, the weakest reading since September 2010, after an 85,000 gain in July that was less than initially estimated, Labor Department data showed today in Washington. The median forecast in a Bloomberg News survey called for a rise of 65,000. Hourly earnings and hours worked both declined. The August data included a 48,000 drop in information industry jobs, mostly reflecting striking Verizon Communications Inc. workers.

The first U.S. credit downgrade, political squabbling over the budget and mounting fear of a default in Europe caused the Standard & Poor’s 500 Index to plummet 17 percent from July 22 to Aug. 8, prompting companies and consumers to cut back. The lack of hiring is one reason Federal Reserve Chairman Ben S. Bernanke last week said the central bank still has tools available to stimulate growth.

“Net employment flat-lined in August,” Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, who forecast a decline of 5,000, said before the report. “When the outlook is uncertain, businesses don’t hire. Calls that we’re on the cusp of a recession or already there are not completely unwarranted.”

Estimates of the 86 economists surveyed by Bloomberg for overall payrolls ranged from a decline of 20,000 to a 160,000 increase. The unemployment rate was projected to hold at 9.1 percent, according to the survey median. Estimates ranged from 9 percent to 9.2 percent.

Don Surber comments:

Excerpt:

Unexpectedly?

Only a mouth-breathing, in-bred moron was surprised to learn that President Obama’s policies have put the economy in a stupor. I thought Bloomberg News was a wire service that specialized in commerce. Have they no one at that agency who does anything but kiss-up to the socialists who are now in charge of our government?

What a mess. The month of August began with the first downgrade of America’s credit rating in memory. That failure alone should cost him his job.

Youth unemployment tops 25%. Black unemployment is at 16.7%. Hispanic unemployment is at 11.3%.

14 million people are jobless.

6 million people have not had a job for more than 6 months.

86 million working-age people are not in the job market.

[…]Few companies are expanding as they wonder what in the heck his EPA policies will do to them, what in the heck his health insurance policies will do to them and what in the heck his tax policies will do to them. The 9.1% unemployment rate in August matches July as the economy hits the horse latitudes, where it will stay for about another year until hope of a new regime change begins to take hold.

Barack Obama’s presidency has hurt the poor and minorities the hardest. Their jobs were the first to go and on his watch, 1.5 million fewer Americans have jobs than on his Inauguration Day. This is terrible. He may have inherited a recession but he seems bound and determined to make it a depression.

What does Bloomberg mean by “unexpectedly”. Does letting the government take money from taxpayers and businesses create jobs?

CBS News reports on what the stimulus does:

ABC News reports on more stimulus spending:

And this one features a real economist:

Let’s learn some economics and find out why Obama’s government spending, green jobs, tax the rich, regulate businesses approach hasn’t work to create jobs.

Economics in One Lesson

Perhaps it is time to review Henry Hazlitt’s book on basic economics “Economics in One Lesson”. Let’s look in chapter 4, which is entitled “Public Works Mean Taxes”.

Excerpt from that chapter:

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers.

And consider Chapter 5 as well, entitled “Taxes Discourage Production”.

In our modern world there is never the same percentage of income tax levied on everybody. The great burden of income taxes is imposed on a minor percentage of the nation’s income; and these income taxes have to be supplemented by taxes of other kinds. These taxes inevitably affect the actions and incentives of those from whom they are taken. When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only fifty-two cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected. It does not expand its operations, or it expands only those attended with a minimum of risk. People who recognize this situation are deterred from starting new enterprises. Thus old employers do not give more employment, or not as much more as they might have; and others decide not to become employers at all. Improved machinery and better-equipped factories come into existence much more slowly than they otherwise would. The result in the long run is that consumers are prevented from getting better and cheaper products to the extent that they otherwise would, and that real wages are held down, compared with what they might have been.

There is a similar effect when personal incomes are taxed 50, 60 or 70 percent. People begin to ask themselves why they should work six, eight or nine months of the entire year for the government, and only six, four or three months for themselves and their families. If they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide that it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from starting new enterprises. The government spenders create the very problem of unemployment that they profess to solve.

And the results we see today are consistent with the predictions of basic economic theory.