Tag Archives: Taxes

News

Can government create jobs more efficiently than private businesses?

2 Comments

Consider this story from CNS News.

Excerpt:

According to the Government Accountability Office (GAO), the federal government helped pay the home air conditioning bills for more than 11,000 dead people, 1,100 federal employees, and 725 convicts in fiscal year 2009.

The payments were made by a $5 billion program known as the Low-Income Home Energy Assistance Program (LIHEAP). LIHEAP is designed to provide federal assistance, administered by the states, to help people pay the energy bills to heat their homes in the winter and cool them in the summer. The funds are disbursed by the Department of Health and Human Services and are distributed based on a formula that takes into account a state’s weather and the size of its low-income population.

The GAO examined the LIHEAP programs in seven states: Virginia, Maryland, Ohio, New York, Illinois, Michigan, and New Jersey.  The agency found evidence of fraud in each state.

“Our analysis of LIHEAP data revealed that the program is at risk of fraud and providing improper benefits in all seven of our selected states,” reported the GAO.  “About 260,000 applications–9 percent of households receiving benefits in the selected states–contained invalid identity information, such as Social Security numbers, names, or dates of birth.”

Think that’s an isolated event?

Consider this list of government spending projects from Andrew Breitbart’s Big Government. (H/T The Blog Prof)

Excerpt:

  • $5 million to create a geothermal energy system for a shopping mall in Tennessee. The mall is over half empty of tenants and has had falling shopper attendance for years *
  • $1.57 million to Penn State University study fossils in Argentina *
  • $100,000 to a puppet theater in Minnesota *
  • $2 million to build a replica railroad tourist trap in Carson City, Nev. *
  • A boat cruise company in Chicago got almost $1 million to “combat terrorism” *
  • $500,000 went to Ariz. State Univ. to study ant genetics *
  • Another $450,000 went to Uinv. of Arizona to study ants *
  • Almost $400,000 went to Univ. of New York to pay students to drink beer and smoke marijuana for a study there *
  • $219,000 to the Nat’l Institute of Health to study if young people “hook-up” after getting drunk *
  • $210,000 to the Univ. of Hawaii to study bees *
  • $700,000 to crab fishermen in Oregon to pay for lost crab pots *
  • $5,000 a person tax rebate if you buy a new electric golf cart (Wall Street Journal)
  • Up to $1 million went to prisoners in $250 stimulus checks (FoxNews)
  • $54 mil to a New York Indian tribe to run its casino (New York Post)
  • $1 billion for a power plant in Mattoon, Illinois that is based on speculative science and may not even work **
  • $15 million to back-road bridges that get little traffic in Wisconsin **
  • $800,000 for a practically unused airport in Pennsylvania **
  • $3.4 million for an animal walk way under a road in Florida **
  • $1.15 million to install a guard rail for a lake that doesn’t even exist in Oklahoma **
  • $10 million to renovate a rail station that has stood unused for a decade **
  • $578,000 to battle homelessness in Union, New York even though the town says they have no homeless people there **
  • $233,000 to the Univ. of Calif. to study why Africans vote… in Africa ***
  • $2 million to build a new fire house in a Nevada town that has no firemen ***
  • North Carolina schools got $4.4 million for literacy and math coaches… to teach their teachers! ***
  • $54 million for a railroad project in Napa Valley went to a minority-owned company that then hired a local construction company for half the price, pocketing the rest ***
  • A California company was given $15 million in stimulus money to monitor water quality in a stream it was under indictment for polluting previously***

I’m sure that no small business has money to waste on boondoggles like these – but they are being taxed to pay for the government to do it! And that leaves less money for them to create jobs.

Obama’s spending spree is about one thing and one thing alone – buying votes from the constituencies that voted for him so that they’ll vote for him again. That’s why public sector employment, public sector salaries and public sector benefits are all up during this massive recession, while millions of jobs have been lost in the private sector.

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.

Excerpt that the government, lacking a profit motive, is never as efficient as private business is in spending money – government wastes money that it never earned in the first place.

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. Government spending is a job killer. In fact, you can even see it failing today in Japan: Did massive government spending succeed or fail in Japan?

Commentary

If Democrats understand economics, then why is unemployment so high?

2 Comments

First, Nancy Pelosi thinks that the productive people should pay people not to work. (H/T Hot Air)

What’s wrong with that?

Ed Morrissey writes:

  • “This is one of the biggest stimuluses to our economy” — No, it’s a net drain on the economy, although for understandable purposes.  It reroutes capital from production to non-production.  We are paying people who aren’t working by using capital that could otherwise go to creating jobs.  It’s a policy tradeoff and understandable, although not for 99 weeks, which is what Pelosi is attempting to extend further.
  • “It injects demand into the economy” — Not at the rate in which the capital gets destroyed.  Remember, the money for this program gets confiscated from producers and passed through the government bureaucracy to non-producers.  What winds up back in the hands of producers is much less than what left their hands in the first place.
  • “It creates jobs faster than almost any other initiative” — No, it doesn’t.  In fact, it depresses job creation, which is part of the policy tradeoff.  If this was right, we’d be at zero unemployment by now.  Tax cuts, especially on capital gains, creates jobs by getting capital into the hands of job creators.
  • “It’s impossible to think of a situation where we would have a country without unemployment benefits” — That’s not actually the debate.  No one is suggesting that we eliminate all unemployment benefits.  The debate is whether we will keep extending them further.

The trouble is here is that the federal government takes a cut for themselves whenever they redistribute money from one group to another. And the government doesn’t produce jobs as well as the producers they take the money from – because government is wasteful and inefficient compared to private business.

Hillary Clinton

Here’s a post from The Right Scoop showing what Hillary Clinton thinks of producers. (H/T ECM)

She says:

It’s important, too, that we look at how to promote broadly-based prosperity. One of the problems in societies around the world today is that too much of the productivity of the economies are going to too few. Too few people, the political and economic elite, are realizing the vast majority of benefits from economic activity. It’s true in my own country where, unfortunately, economic inequality is increasing. And it’s true in Ukraine. It’s true in Europe and Asia and Africa and South America. So part of the challenge of economic growth and prosperity is to make sure it gets down and equally spread among people.

When you take money from the few, and reward the many, it also helps you to get re-elected – because you’re buying more votes. Pretty soon, you have half the population paying no federal taxes and the top half of earners paying almost all the federal taxes. Eventually, the top earners realize that they are being bled dry by the the preening wealth redistributors in government, and they scale back their production and hiring, outsource their jobs to other countries, or leave the country entirely. And that’s why unemployment is at 10%. It’s something that leftists like Pelosi and Clinton never learned – they have no concern st all about how the people they rob will respond to being robbed. And it impoverishes us all when we punish the most productive members of society. Where do you think jobs come from? The poor?

Barack Obama

The Detroit News reports on one of the reason why we all lose when government decides that they know better ways to spend money than entrepreneurs. (H/T The Blog Prof)

Excerpt:

The government is handing out nearly $2 billion for new solar plants that President Barack Obama says will create thousands of jobs and increase the use of renewable energy sources.

Obama announced the initiative in his weekly radio and online address Saturday, saying the money is part of his plan to bring new industries to the U.S.

“We’re going to keep competing aggressively to make sure the jobs and industries of the future are taking root right here in America,” Obama said.

The two companies that will receive the money from the president’s $862 billion economic stimulus are Abengoa Solar, which will build one of the world’s largest solar plants in Arizona, creating 1,600 construction jobs; and Abound Solar Manufacturing, which is building plants in Colorado and Indiana. The Obama administration says those projects will create more than 2,000 construction jobs and 1,500 permanent jobs.

That’s $1,333,333 per new permanent job.

That money could have created many more jobs in the private sector. But now it’s been wasted for politically correct solar power. And that’s why government spending prolongs recessions – it takes money away from job creators for fashionable boondoggles designed to get people elected.

UPDATE: The ONLY stimulus that counts is A JOB – or several job offers. People on unemployment are not going to spend because the future is too uncertain. What makes people spend is a current job, along with the prospect of other jobs if this one falls through. That’s what caused people to spend. You need to give tax breaks to the suppliers – suppliers stimulate demand by creating products that people actually want to buy.

Commentary

How economic uncertainty causes businesses to hire fewer workers

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Story from center-leftist Fareed Zakaria in the radically leftist Washington Post. (H/T Marathon Pundit)

Excerpt:

But government spending can only be a bridge to private-sector investment. The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

Economic uncertainty was the primary cause of their caution. “We’ve just been through a tsunami and that produces caution,” one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

One CEO told me, “Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what’s in store for us for the future.” Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations. Lobbyists have been delighted by all this activity. “[Obama] exaggerates our power, but he increases demand for our services,” superlobbyist Tony Podesta told the New York Times.

Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.

I think this was one of the points that really stood out to me in Amity Shlaes’ book “The Forgotten Man”, a badly-written book on the Great Depression. She spoke at length about how the unpredictable interventionism of statists like Herbert Hoover and Franklin Delano Roosevelt caused businesses to get so flustered that they just stopped all entrepreneurial activity, including hiring, in order to wait the big-government socialists out. It ended up delaying the economic recovery.

And that’s what we see with Obama and his interventions into the free market today. Every dollar spend by the government costs jobs. Every regulation passed to control businesses costs jobs. Every line of anti-capitalist rhetoric costs jobs. Every Obama is doing to oppose businesses costs jobs. At some point, he’s going to realize that the election is over and he needs to stop scaring businesses in order to win the votes. Now is the time for tax cuts on businesses.