June 7, 2010

‘Employers on Strike’: Team Obama Could Care Less

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 10:10 am

BeaverBuildItYourOwnDamSelfFrom the Wall Street Journal’s Friday editorial:

… nearly half of all unemployed workers in America today (a record 46%) have been out of work for six months or more. Normally job growth accelerates during the early stages of an economic rebound, but this dismal report suggests that the recovery remains well short of becoming a typical expansion.

(White House chief economist Christina) Romer and economic co-religionist Jared Bernstein … (said) that the February 2009 stimulus would kick start a recovery in growth and jobs. Whatever happened to the great neo-Keynesian “multiplier,” in which $1 in government spending was supposed to produce 1.5 times that in economic output?

… The multiplier is an illusion because that Keynesian $1 has to come from somewhere in the private economy, either in higher taxes or borrowing. Its net economic impact was probably negative because so much of the stimulus was handed out in transfer payments (jobless benefits, Medicaid expansions, welfare) that did nothing to change incentives to invest or take risks. Meanwhile, that $862 billion was taken out of the more productive private economy.

Almost everything Congress has done in recent months has made private businesses less inclined to hire new workers. ObamaCare imposes new taxes and mandates on private employers. Even with record unemployment, Congress raised the minimum wage to $7.25, pricing more workers out of jobs. …

The “jobs” bill that the House passed last week expands jobless insurance to 99 weeks, while raising taxes by $80 billion on small employers and U.S-based corporations. On January 1, Congress is set to let taxes rise on capital gains, dividends and small businesses. None of these are incentives to hire more Americans.

Ms. Romer said yesterday that to “ensure a more rapid, widespread recovery,” the White House supports “tax incentives for clean energy,” and “extensions of unemployment insurance and other key income support programs, a fund to encourage small business lending, and fiscal relief for state and local governments.” Hello? This is the failed 2009 stimulus in miniature.

… if Ms. Romer wants this to be more than a jobless recovery, she and her boss should drop their government-creates-wealth illusions and start asking why so many private employers remain on strike.

At this point, Romer and Team Obama have to know that Keynesian stimulus doesn’t work to improve the economy quickly enough to prevent serious rises in unemployment, and doesn’t work over the longer term to bring unemployment down. This is at least the third time that it’s been proven — FDR’s New Deal in the 1930s, Japan in the 1990s and beyond, and now:


That Romer et al are pushing the “failed stimulus in miniature” to which the Journal refers is compelling evidence that this administration doesn’t care that Keynesian stimulus doesn’t work. At this point, it isn’t about economic recovery (if it ever was). It’s about expanding government and dependency on it, joblessness be damned.

Where is the evidence beyond hollow rhetoric that that this isn’t so?

Expect to hear bully-pulpit blather desperately demonizing employers for not hiring more people because corporate profits have been decent. They don’t get it; until this administration does something about pervasive, government-induced FUD (Fear, Uncertainty, and Doubt), companies that hire as if a big expansion is coming will with rare exceptions be acting against their own and their shareholders’ best interests.



  1. Tangentially to this is the coming tax hikes for income starting 2011, i.e. the expiration of the Bush tax cuts.

    Laffer: 2011 ‘Tax’ Collapse Coming


    Laffer notes that, according to a 2004 U.S. Treasury report, high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992 — more than $15 billion — in order to avoid the effects of the anticipated increase in the top rate from 31 percent to 39.6 percent.

    At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994.

    Tom, now here is a really chilling thought, IF everyone’s accountant is telling those with significant finances to take the tax hit this year to avoid the tax increases next year in 2011, Tax receipts will plummet yet again compared to this year’s horrible collections. What’s even more chilling is this year’s collections even with the income shifting to avoid next year’s increases is absolutely terrible…

    Comment by dscott — June 8, 2010 @ 2:36 am

  2. #1, of course they’re going to say to take as much income as you possibly can this year, and cash out investments this year (to avoid the Medicare investments tax).

    Comment by TBlumer — June 8, 2010 @ 7:01 am

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