American Elephants


Obama Will “Pivot to Jobs” Once Again! by The Elephant's Child

obama-listening

Investors Business Daily reported on President Obama’s preview of his State of the Union speech to Democrats. He promised that after four years of historically weak economic growth and an unemployment rate that seems stuck at or near 8% since he first took office, he’s going to turn his attention to job growth.

Even the Huffington Post put together a “Pivot to Jobs Deja Vu” story:

  • January 2009: “My economic agenda…begins with jobs”
  • November 2009: “This is my administration’s overriding focus.”
  • January 2010: “We are going to have a sustained and relentless focus over the next several months on accelerating the pace of job creation, because that’s priority No. 1.”
  • September 2010: “Our No. 1 focus has to be jobs, jobs, jobs.”
  • December 2010: “My singular focus over the next two years is…jump-starting the economy so that we actually start making a dent in the unemployment rate.
  • January 2011: “My principal focus, my No 1. focus, is going to be making sure that we are creating jobs not just now but well into the future.
  • November 2012: “Our top priority has to be jobs and growth.”

The new words are “growth agenda.” This means he is going to recycle his jobs promise, and offer up the same old economic nostrums he has been pushing for the past four years. More taxpayer money will be directed to cronies in the green energy business because they will promise green jobs. He will “invest” more on education and “roads and bridges,” raise taxes higher on the rich— just to be completely fair. He will also go on about growing the economy “from the middle out,” with no explanation of how that works.

This is really sad. At a time when the American people really need a growing economy that will grow the need for more jobs; the necessary understanding of how jobs are created is at complete odds with this president’s most basic ideas about the value of big government.  He has no understanding of the risks a business must take to borrow large amounts of money and expand; and how more layers of regulation which come along with threats of overcriminalization, the need to hire more workers just to keep up with the required paperwork —which just costs a business more without adding a cent in revenue. Taxes are going up. Obamacare is raising costs so much that businesses are having to reorganize entirely to avoid the costs of offering insurance to their workers.

Democrats’ idea of incentives have always been: “we will give you benefits and then you will vote for us so you do not lose the benefits.” It works a goodly percentage of the time.

There is a point at which the recipients of government largesse simply give up, and accept that it will not get any better, there is nothing to hope for except winning the lottery, and they have to protect the benefits they are receiving. That’s a dreadful spot to be in, because you no longer believe in yourself. And government benefits are only as dependable as the government in power as long as they decide to continue them. You are completely at the mercy of a bunch of politicians, and that is a frightening place to be.

Art Laffer has a column in the Wall Street Journal explaining the role played by disincentives in economics. The example comes from Pennsylvania where the young single mother with two children on welfare will receive government “needs tested” benefits — such as food stamps, child care and Medicaid services — worth more than $45,000 annually. If she begins earning wages, her total annual income, including her welfare benefits will rise as well—up to about $9,000 in wages. The next $5,000 in wages mean she will lose some Medicaid and other benefits, the equivalent of a $100% marginal tax. Would that motivate you to go out and find work?  Didn’t think so.

This means her total income — welfare benefits plus wages, minus taxes— won’t reach $57,000 until her gross wage income rises to $69,000. The money she earns between $29,000 and $69,000 faces a marginal tax rate of 100%. Her housing and food subsidies drop way down when she reaches $29,000, and at $57,000 her family no longer qualifies for the Children’s Health Insurance Program (CHIP).

This example is particular to Pennsylvania, but there are similar disincentives everywhere. Minimum-wage laws intended to help the young and poor, but study after study has shown that governmental minimum-wage laws discourage employers from hiring.  Laffer suggests:

How to counter these disincentives? My preferred solution is to enact a form of enterprise zone where marginal tax rates would be greatly lowered for both employers and employees in areas with high poverty. For starters, employer and employee payroll taxes could be eliminated for people who both live and work in the enterprise zones. There would be scant revenue loss to the U.S. Treasury because few people are working in these areas anyway.

This is all just part of the old saying that the right hand doesn’t know what the left hand is doing —particularly true in government and politics.  Democrats are unusually susceptible to “investing” taxpayer money in schemes that they believe will make the people love them and draw closer to that dream of a better world that they cherish. They just don’t recognize all the stumbling blocks in the way, nor that their better world is unreal and unreachable. And of course as Margaret Thatcher used to say. “Sooner or later you run out of other people’s money.”



Everything You Need to Know About Raising Taxes by The Elephant's Child

There’s a lot about economics that is counterintuitive, and for the most part, liberals just don’t understand that. More than that, they deliberately reject the idea when it is explained. Perhaps it’s just not in their DNA.

For example: the minimum wage, which is meant to be the bottom limit for beginning workers, and is meant to protect innocents from exploitation. For liberals, it’s not enough pay for a poor person and his family. But the minimum wage is not directed to a worker and his family. By the time someone has a family to support, they can be assumed to have worked.

True beginners aren’t worth very much. They don’t know how to sweep the floor, how to answer the telephone, how to speak to customers, and how to follow the rules of the business. The manager is going to have to teach them all these things before they can be turned loose to do them properly on their own. All workers are a cost to business, but at a certain level of productivity, their work pays for their cost and makes money for the employer. Most minimum wage employees get a raise within the first six months.  When they become useful, their reward grows. When government raises the minimum wage, it increasingly eliminates job openings for beginners, depending on how high the minimum wage becomes. There is a reason why there are ATM machines, and more and more stores have self-checkout machines.

If you raise taxes, you get more revenue, right? Liberals hate the Laffer Curve because it directly attacks a cherished belief. Raising taxes has always been their solution to their constant need for more revenue to support Big Government. If they were to give up on the idea that they cannot constantly raise taxes, they would have to give up on the idea that they can constantly increase the size of government. They would become Republicans.

From June 2009 to September 2012, America gained some 2.59 million jobs. That weak recovery was what Obama bragged about. But nearly all of the job creation occurred in right-to work states, states in which no industry can force a worker to join a union in order to work. There are 22 right-to-work states, and those states were responsible for 72% of all net household job growth. But don’t unions get better pay for their workers? Many workers don’t believe that it matters.

Peter Ferrara wrote in Forbes on Friday that:

If those who make the sacrifice to save and take the risk of investing find that the government is only going to seize their savings and investment when they are successful, they will soon sharply reduce their savings and investment, at least here in America. That will only hurt the middle class and the poor the most, as they lose the jobs and rising wages and incomes essential to their own personal prosperity.

But that is all only going to get much worse in Obama’s second term, as his policies produce renewed recession, double digit unemployment, collapsing real wages and incomes, and new poverty records.

In a market economy, consumer demand can never be inadequate for the economy to grow and prosper. If demand is not sufficient to clear the market for any good or service, the price of the good or service will fall until demand equals supply.



Why Are Rich Liberals Such Hypocrites? by The Elephant's Child

Even some very rich leftists — those proverbial millionaires and billionaires — whom Obama claims are not paying their fair share, want President Obama to raise taxes on the rich. If you want to know why rich liberals are not just hypocrites, but wrong as well, read this post from economist Daniel Mitchell that tries to teach President Obama about the Laffer Curve.  If this doesn’t make  you giggle, you have no sense of humor.




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