As part of his promised new focus on jobs, President Obama yesterday hosted a bipartisan jobs meeting. But he has yet to propose many pro-employment specifics — and his overall economic plan remains unmistakably anti-job.
Other than a few odd ideas like using TARP funds paid by banks to fund more government programs, Obama’s main push is for a “jobs” bill like the $150 billion measure the House has already passed, which includes various tax credits and new spending to supposedly create jobs.
But the spending there is hopeless — it’s more of the same ideas that failed in last year’s budget-busting “stimulus” bill. Sadly, the tax credits aren’t much better.
One problem is that these aren’t broad tax cuts — which have had a job-creating effect in the past. Rather, they’re specific bribes to businesses for doing a few specific things — like boosting their payroll over a certain level. The same approach was an utter failure under President Jimmy Carter in the late ’70s.
Worse, the credits — a total of perhaps $33 billion — are dwarfed by the tax hikes that Obama and the Democratic Congress are promising for next year. How many businesses will change the behavior for a small carrot this year — when they know they’re about to be hit by a far larger stick?
Consider: Obama’s budget for 2011 calls for tax increases of more than $122 billion on companies with overseas businesses. The demagogic line is that this will stop them from exporting jobs — when in fact it will spur them to do more of it. Who expands in a country that’s aiming to make it harder to do business? Some firms will split into two entities to avoid the tax — while others will move offshore.
More important, the president and the leaders of Congress are committed to letting President Bush’s tax cuts expire for the top income-tax brackets. Obama estimates that this will add $678 billion to the government’s tax receipts. Yet this isn’t just a tax hike on “the rich” — it’s a blow to small businesses; many of which pay their taxes via the personal-income-tax code.
Some 3 million small-business or partnership filers would be hit by the personal-income-tax hikes Obama has embraced.
On top of that, Obama and Democrats in Congress are also set on letting higher tax rates kick in on capital gains and dividends — which Obama estimates will bring more than $100 billion for the feds. It is puzzling, because the President understands that capital gains taxes hurt the economy. After all, he has repeatedly advocated for eliminating capital gains for startups, which is nice but very few startups are profitable enough to pay taxes.
These higher taxes on investment will more than offset the increased lending Obama intends to have the Small Business Administration do. Plus, he’d get the funds for the SBA by recycling TARP money that is supposed to go back to the Treasury, reducing the deficit. In any case, SBA lending is far less efficient and is riskier than private-sector lending, as the General Accounting Office has found.
The good news is that the fundamental resilience of the US economy will boost employment — eventually. But higher taxes and the drag on the economy from the exploding federal deficit will leave business struggling for the next several years: Slow job growth is virtually guaranteed.
If there’s a silver lining in all this, it’s that — by proposing tax credits to boost job growth — liberals in Congress and the White House are finally admitting that high taxes can deter employment. Too bad they’re not better at math: Sorry, guys, but $33 billion in tax credits pales in comparison to the $1.1 trillion in new taxes that the president proposes in his budget.
Unlike politicians, businesses must focus on the bottom line. A trillion-dollar tax hike, plus the remaining possibility of other tax increases from some health-“reform” bill — and the ongoing drag of ever-heavier regulation from bureaucrats in liberal-run Washington — are discouraging businesses from hiring. And no amount of table scraps from Washington is going to change that.
Rea Hederman is a senior policy analyst at The Heritage Founda tion (heritage.org).