American Elephants

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


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.”

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