The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.
“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”
But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.
Proponents of the tax break lauded it as a means to spur economic activity by encouraging purchases of large manufactured goods (planes). So the president’s statement today – and his call to repeal that tax break generally – is either a tacit admission that the stimulus included projects that did not, in fact, stimulate the economy, or an attempt to “soak the rich” without regard for the policy’s effects on the economy.
For many Americans, those effects could be dramatic. Cessna and Gulfstream have facilities in a combined 15 cities nationwide (and another four abroad). A significant decline in consumption of private jets would undoubtedly have adverse effects on at least some of those local economies. Given the sizable bump in consumption that the initial tax break yielded, its repeal would likely have that economic domino effect.
Rightly or wrongly, any increase in the taxes paid by any US-based business is going to result in higher prices for consumers, or layoffs, or both. Even talking badly about businesses causes them to feel uncertain about the future. And when businesses are uncertain, they don’t hire people and they don’t expand. Obama’s solution to the recession created by the Democrat housing policies was to take money from the private sector and blow it on the public sector. Private companies realize that the bill is going to come due soon, and they are sitting on their money in case Obama succeeds in his plan to raise taxes on businesses.
Solyndra, Inc. was supposed to have showcased the effectiveness of the Obama administration’s stimulus and green jobs initiatives, but instead it has become the center of congressional attention for waste, fraud and abuse of such programs.
According to a Feb. 17 letter signed by Energy and Commerce Committee Chairman Fred Upton, Michigan Republican, and Oversight Subcommittee Chairman Cliff Stearns, Florida Republican, to Energy Secretary Steven Chu, the Fremont, Calif.-based solar panel manufacturer should never have received a $535 million loan guarantee from the stimulus.*
The company became the first recipient of an Energy Department loan guarantee under the stimulus in March 2009, which was intended to “finance construction of the first phase of the company’s new manufacturing facility” for photovoltaic solar panels.
The Energy Department estimated in a March 20, 2009 press release that the loan guarantee would create 3,000 construction jobs and a further 1,000 jobs after the plant opened.
And President Barack Obama and Vice President Joseph Biden each personally showcased Solyndra as an example of how stimulus dollars were at work creating jobs, during appearances at the company over the course of the following year.
Biden personally announced the closure of Solyndra’s $535 million loan guarantee in a Sept. 9, 2009 speech, delivered via closed-circuit television, on the occasion of the groundbreaking of the plant.
The vice president justified the federal government’s investment in Solyndra in front of employees and other dignitaries, including Secretary Chu and former Calif. Gov. Arnold Schwartzenegger, saying the jobs the company intended to create would “serve as a foundation for a stronger American economy.”
“These jobs are the jobs that are going to define the 21st century that will allow America to compete and to lead like we did in the 20th century,” Biden said.
According to Biden’s speech, the $535 million loan guarantee was a smaller part of the $30 billion of stimulus money the administration planned to spend as part of its Green Jobs Initiative.
Obama made similar claims in a May 26, 2010 speech at the plant, but the 1,000 jobs he and Biden touted in their respective speeches failed to materialize.
Instead, Solyndra announced on Nov. 3 it planned to postpone expanding the plant, which put the taxpayers on the hook to the tune of $390.5 million taxpayers**, or 73 percent of the total loan guarantee, according to the Wall Street Journal.
It also announced that it no longer planned to hire the 1,000 workers that Obama and Biden had touted in their speeches and that it planned to close one of its older factories and planned to lay-off 135 temporary or contract workers and 40 full-time employees.
A closer look at the company shows it has never turned a profit since it was founded in 2005, according to its Securities and Exchange Commission (SEC) filings.
And Solyndra’s auditor declared that “the company has suffered recurring losses, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, [that] raise substantial doubt about its ability to continue as a growing concern” in a March 2010 amendment to its SEC registration statement.
“While we understand the purpose of the Loan Guarantee Program is to help private companies engaging in clean energy products to obtain financing by providing loan guarantees, subsequent events raise questions about Solyndra was the right candidate to receive a loan guarantee in excess of half a billion dollars,” Upton and Stearns wrote.
A June 2010 Wall Street Journal report indicating that Solyndra’s majority owner, Oklahoma billionaire George Kaiser, was a major fundraiser for the 2008 Obama-Biden campaign has stimulus opponents such as Citizens Against Government Waste crying foul.
What did we get for spending nearly a trillion dollars on stimulus? We got 9% unemployment. But Obama’s political cronies got a big raise.
Economics in One Lesson
Perhaps it is time to review Henry Hazlitt’s Economics in One Lesson, chapter 4, entitled “Public Works Mean Taxes”.
Excerpt:
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.
George W. Bush cut taxes in his first term and created 1 million NEW JOBS. Obama transfered BILLIONS from the private sector to the public sector, where government waste is rampant. Government spending is a job killer. Obama might be a nice man, but he is just wrong on economics and business. What we should have done is elected someone who doesn’t repeat the mistakes made in other countries, like in Japan where massive government spending failed to stimulate the economy. And we shouldn’t enact single-payer health care, because it’s not working in Canada. The wait times to see doctors in Canada are increasing. We should only imitate the successes of other countries, like the free trade agreements in Chile or the flat tax in Lithuania or the private retirement accounts in Chile or the low tax rates of Hong Kong. We have to decide, as a nation, whether we want jobs and prosperity, or rhetoric and feelings.
President Barack Obama heads to an energy plant in North Carolina on Monday to talk once again about the job-creating power of a green economy.
The catch? Nearly three years into Obama’s presidency, the White House can’t point to much solid evidence that significant numbers of Americans are scoring the green jobs the president has been touting.
Monthly Labor Department employment reports say nothing about the new clean energy workforce, while an effort to document how many Americans actually make a living in the “green collar” field may not be done by November 2012.
Obama’s Council of Economic Advisers suggests 225,000 clean energy jobs were either created or preserved through the third quarter of 2010 thanks to more than $80 billion in the economic stimulus package. But those are estimates at best.
White House officials say asking about the connection between the 9.1 percent unemployment rate and the administration’s concerted green jobs campaign is the wrong question.
Pajamas Media has received a leaked internal assessment produced by Spain’s Zapatero administration. The assessment confirms the key charges previously made by non-governmental Spanish experts in a damning report exposing the catastrophic economic failure of Spain’s “green economy” initiatives.
[…]Unsurprisingly for a governmental take on a flagship program, the report takes pains to minimize the extent of the economic harm. Yet despite the soft-pedaling, the document reveals exactly why electricity rates “necessarily skyrocketed” in Spain, as did the public debt needed to underwrite the disaster. This internal assessment preceded the Zapatero administration’s recent acknowledgement that the “green economy” stunt must be abandoned, lest the experiment risk Spain becoming Greece.
The government report does not expressly confirm the highest-profile finding of the non-governmental report: that Spain’s “green economy” program cost the country 2.2 jobs for every job “created” by the state. However, the figures published in the government document indicate they arrived at a job-loss number even worse than the 2.2 figure from the independent study.
Green jobs programs don’t work. They haven’t worked anywhere.
Does Obama look around the world and evaluate what policies work and what policies don’t work? Or does he just decide how to spend private sector money based on what makes him feel good, and what makes him look good? Is that what being President is about? Wasting tons of taxpayer money and bankrupting the country so that you can feel good about yourself because people think you are doing something good?
WINTERY KNIGHT 